Business

Canadians are dispirited, cutting back on costs amid inflation highs: study

With inflation at a 39-year high — and banks hiking interest rates to avoid economic recession — many Canadians are said to be distressed and dispirited as they cut back on spending to manage the rising cost of living.

Study from Angus Reid Institute shows optimism fading among penny-pinched Canadians

A grocery store shopping cart holding various food items.
A grocery cart is seen at a Metro market in Montreal on Jan. 19. According to a new study from the Angus Reid Institute, Canadians are cutting back on spending to cope with rising inflation and interest rates. (Ivanoh Demers/CBC/Radio-Canada)

With inflation at a 39-year high — and banks hiking interest rates to avoid economic recession — many Canadians are said to be distressed and dispirited as they cut back to manage the rising cost of living.

A new study from the polling non-profit Angus Reid Institute shows that 45 per cent of Canadians believe they are worse off now than they were at this time last year. Inflation is now at 7.7 per cent, the highest it has been since 1983.

  • Have you noticed inflation has been driving up the prices of summer camp this year? Have you had to alter or cancel your plans because of it? We want to hear from you for an upcoming story. Send an email to ask@cbc.ca

With grocery and gas prices skyrocketing, Canadians are trying to spend less as their personal costs go up. Almost half say they are now seeking out alternative modes of transport to avoid filling up their gas tanks.

"A lot of people are concerned," said David Chilton, author of financial self-help book The Wealthy Barber, in an interview with CBC News Network.

Chilton noted that low-income people are particularly impacted by the price hikes because they spend a disproportionate percentage on essentials like food and gas.

According to the study, half of Canadians say it's been challenging to afford their typical grocery bills.

"I would argue the inflation numbers, as high as they are being reported today, are probably higher, frankly," Chilton said.

"Anybody that goes to the grocery store I think would agree with that."

'They will raise rates until they break something'

The Bank of Canada has been aggressively raising interest rates in efforts to calm inflation, with a hike in March to 0.5 per cent (the first since 2018) followed by another in April to one per cent. 

In June, the bank raised its benchmark interest rate a third time this year to 1.5 per cent and indicated that several more hikes are coming. The increases are meant to encourage saving and discourage borrowing in an overheated economy.

WATCH | 45% of Canadians say they're worse off financially than last year: study

45% of Canadians say they're worse off financially than last year: study

2 months ago
Duration 3:26
A study from the Angus Reid Institute suggests nearly half of Canadians say they're worse off financially now than a year ago, and 34 per cent think they'll be worse off next year.

As a result, 22 per cent of Canadians with a mortgage say their payments have increased; more than half say that they fully expect theirs to go up, according to the report.

An increase of $150 per month would be difficult for over a third of homeowners — but raising that number to $300 would be downright unaffordable, 66 per cent said, forcing them to seriously consider a change of plans.

Renters are also feeling stretched thin, with over half saying that affording monthly rent is difficult.

WATCH | The Wealthy Barber author discusses how rising inflation is impacting Canadians:

The Wealthy Barber author talks inflation, recession fears and more

2 months ago
Duration 8:26
David Chilton, author of The Wealthy Barber, looks at how high gas prices and grocery bills amid stagnant wages have hit low-income Canadians the hardest.

"I think that you are going to see central banks throughout the world continue to raise rates" to contain inflation, Chilton said.

"It's impacting people and I think they will raise rates until they break something."

When it comes to placing their trust in the Bank of Canada, Canadians are split: just under half (46 per cent) say that they believe the bank adequately fulfils its mandate, while slightly fewer (41 per cent) say they believe otherwise.

Three quarters of Canadians are dissatisfied with the way that provinces have handled rising inflation.

The study, conducted online, surveyed 5,032 Canadian adults who are members of the Angus Reid Forum, between June 7 and 13. For comparison purposes, a probability sample of this size carries a margin of error of +/- 2 percentage points, the non-profit said.

In April, while announcing a rate hike, Bank of Canada governor Tiff Macklem told reporters that the bank is trying to anchor inflation expectations.

"The longer inflation remains well above our target, the greater is the risk that Canadians begin to think that this higher inflation is going to persist, and that becomes embedded in their inflation expectations."

"The need to make sure that inflation expectations remain moored on our two per cent target was reflected in our decision today."

About two in five Canadians have credit card debt, as well, with that number increasing to 62 per cent among those who qualified as "struggling" on the Angus Reid Institute's economic stress index. 

Within this group, about 58 per cent say it will take over a year to pay off those debts.

It's a very "unusual time," Chilton says.

"I think everybody has to approach it from their individual perspective … I always believe you've got to watch your costs, but that's more true now than ever."

ABOUT THE AUTHOR

Jenna Benchetrit is a web journalist for CBC News. Based in Toronto and born in Montreal, she holds a master's degree in journalism from Ryerson University. Reach her at jenna.benchetrit@cbc.ca or on Twitter @jennabenchetrit.

With files from Pete Evans

Comments

To encourage thoughtful and respectful conversations, first and last names will appear with each submission to CBC/Radio-Canada's online communities (except in children and youth-oriented communities). Pseudonyms will no longer be permitted.

By submitting a comment, you accept that CBC has the right to reproduce and publish that comment in whole or in part, in any manner CBC chooses. Please note that CBC does not endorse the opinions expressed in comments. Comments on this story are moderated according to our Submission Guidelines. Comments are welcome while open. We reserve the right to close comments at any time.

Become a CBC Member

Join the conversation  Create account

Already have an account?

now