Snowed Under: Falling inflation provides scant relief as Canadians cool holiday spending for a second year

Three-in-five say they are spending less on presents, entertaining; two-in-five donating less


November 30, 2023 – The holiday shopping season may be underway, but the Grinch of inflation continues to dampen holiday cheer.

New data from the non-profit Angus Reid Institute finds Canadians finding little reprieve from a stabilizing inflation situation.

Underscoring how economic conditions continue to drag, the sting of a second year of high consumer prices affecting everything from the cost of vitamins to bread and rent has majorities saying they will spend less on holiday preparations this year (55%) and have cut back on discretionary spending overall in recent months (61%). This continues a trend that emerged last year, when similar numbers said they had cut back.

For seven quarters in a row, more than two-in-five Canadians report feeling left behind as the cost of living rises. Currently, 46 per cent feel they aren’t keeping up financially, nearly quadruple the number who say they are getting ahead (12%). Since the summer, a majority of Canadians have reported they find it difficult to feed their family as prices at the grocery store continue to rise faster than other elements of Statistics Canada’s Consumer Price Index.

The Bank of Canada may be relieved by the recent deceleration of inflation as it considers its next policy rate decision in early December, but Canadians appear more discouraged than not as they look ahead to 2024. Two-in-five (40%) expect to end next year in a similar financial position, while one-third (33%) see their circumstances worsening. Fewer than one-in-five (18%) express optimism that the next 12 months will brighten their financial picture.

More Key Findings:

  • Cost of living stays ahead of the pack of other issues in the eyes of Canadians. Three-in-five (61%) select it as the top issue facing the country, ahead of health care (46%), housing affordability (32%), climate change (24%) and the economy more broadly (21%).
  • Three-in-ten (31%) Canadians are found to be Struggling by ARI’s Economic Stress Index. One-quarter (25%) are Uncomfortable, while equal sized groups are Comfortable (22%) and Thriving (22%).
  • Approaching four-in-five (78%) of the Struggling are spending less on holiday preparations this year, outnumbering the Uncomfortable (64%), Comfortable (47%) and Thriving (20%) who say the same.

About ARI

The Angus Reid Institute (ARI) was founded in October 2014 by pollster and sociologist, Dr. Angus Reid. ARI is a national, not-for-profit, non-partisan public opinion research foundation established to advance education by commissioning, conducting and disseminating to the public accessible and impartial statistical data, research and policy analysis on economics, political science, philanthropy, public administration, domestic and international affairs and other socio-economic issues of importance to Canada and its world.

INDEX

Part One: Cost of living dominates top issues

Part Two: Household finances snapshot

  • More than two-in-five say they’re falling behind, few optimistic for the year ahead

  • Majority say feeding their families difficult

  • Economic Stress Index

Part Three: The season of giving?

  • Canadians cutting back on presents, charitable giving

 

Part One: Cost of living dominates top issues

October economic data brought welcome news for the Bank of Canada. Inflation cooled to an annual rate of 3.1 per cent – nearing the central bank’s target of two per cent – with core inflation measures, which exclude the more volatile items in the Consumer Price Index, down to two-year lows. These among other recent data have many economists expecting the Bank of Canada to hold steady on interest rates in December and anticipating rate decreases as soon as the first half of next year.

The federal government said it was doing its part to keep a lid on inflation by pledging to keep deficits in check as part of its fall economic statement.

That assertion, however, was met with some skepticism from opposition Conservatives as the economic statement added $20 billion of new spending, though many of those measures are aimed at addressing cost of living concerns. Conservative leader Pierre Poilievre was quick to point out a report by Scotiabank that found spending by governments – both provincial and federal – drove the Bank of Canada’s policy rate two percentage points higher than it would have gone otherwise.

Still, as politicians point fingers, Canadians are left to deal with the effects of two years of accelerated inflation. Three-in-five (61%) Canadians choose the cost of living as the top issue facing the country currently, continuing to outpace concerns around health care (46%), housing affordability (32%), climate change (24%) and the economy more generally (21%).

The chorus of voices concerned with inflation is loud nationwide, as the rising cost of living ranks as the top issue in every province in the country:

Part Two: Household finances snapshot

More than two-in-five say they’re falling behind, few optimistic for the year ahead

The impacts of prolonged high inflation can be seen in Canadians’ financial assessments. For two years, a plurality of Canadians have said their financial circumstances have declined. Currently more than two-in-five (46%) say that is the case. Prior to 2022, those who felt they had tread water always outweighed those who felt they were sinking under the economic waves:

Financial optimism has also declined steadily since the onset of the COVID-19 pandemic in early 2020. Fewer than one-in-five (18%) feel they will be in a better position financially in one year’s time. Twice as many (40%) instead feel they’ll at best be in a similar position, while one-third (33%) are pessimistic about their financial future:

Majority say feeding their families is difficult

In recent months, food inflation has slowed, but grocery prices still rose 5.4 per cent year-over-year in October, higher than overall rate of inflation. And slowing inflation does not provide relief for Canadians at the grocery store. TD Bank economist Leslie Preston estimated Canadians are paying more than 20 per cent more for their groceries than three years ago, the biggest increase in four decades.

A majority (54%) of Canadians say they find feeding their household difficult, outnumbering the 44 per cent who instead find it easy. These struggles, too, have persisted over the past two years:

Economic Stress Index

The Angus Reid Institute developed the Economic Stress Index in January 2020 to analyze and understand Canadians’ economic circumstances. The Index includes Canadians’ responses to questions appraising their financial circumstances, including concerns over debt, housing costs, and grocery bills (click here to see how the index is scored).

The Economic Stress Index finds three-in-ten (31%) Struggling in the current financial circumstances, one-quarter (25%) Uncomfortable, and smaller groups Comfortable (22%) and Thriving (22%). These proportions are similar to figures seen earlier this year.

Related: Mortgage woes grow: Number of Canadians saying their mortgage is ‘very difficult’ to pay has doubled since March

Economic stress is not distributed evenly across the country. More than one-third in Saskatchewan (38%), Alberta (36%), B.C. (34%) and Atlantic Canada are assessed to be Struggling. Those in Manitoba and Quebec are more likely to be Comfortable and Thriving than others elsewhere in the country (see detailed tables).

Part Three: The season of giving?

As the holiday season approaches, Canadians are varied in their assessments on how they expect to approach the holiday season financially. One-quarter (25%) anticipate spending more, but more (34%) say they will be pinching their pennies. More than one-third (36%) believe they will be spending about the same as they did last year. The youngest Canadian adults are more likely to say they’ll be spending more, while 35- to 54-year-olds say they have a tighter budget than years past:

Canadians cutting back on presents, charitable giving

As rent, mortgages and grocery bills increase, many Canadians say they are cutting discretionary spending. Three-in-five (61%) say they have cut back on unnecessary expenses in recent months and a majority (55%) say their holiday spending has taken a hit as life has become more expensive. Large groups also say they are delaying major purchases (46%), scaling back on charitable giving (37%) and downsizing vacations (35%). These data are similar to figures seen last December, underlining the fact that financial difficulties have persisted for a year.

Those Struggling in this fiscal environment are much more likely to be making cuts to spending in recent months. Nearly all (98%) have cut at least one discretionary element from recent household budgets. Meanwhile, more than two-in-five (44%) of the Thriving have not:

Survey Methodology:

The Angus Reid Institute conducted an online survey from Nov. 27-29, 2023 among a representative randomized sample of 2,164 Canadian adults who are members of Angus Reid Forum. For comparison purposes only, a probability sample of this size would carry a margin of error of +/- 2 percentage points, 19 times out of 20. Discrepancies in or between totals are due to rounding. The survey was self-commissioned and paid for by ARI.

For detailed results by age, gender, region, education, and other demographics, click here.

For detailed results by the Economic Stress Index, click here.

To read the full report, including detailed tables and methodology, click here.

To read the questionnaire, click here.

Image – Mai Truong/Unsplash

MEDIA CONTACT:

Shachi Kurl, President: 604.908.1693 shachi.kurl@angusreid.org @shachikurl

Jon Roe, Research Associate: 825.437.1147 jon.roe@angusreid.org @thejonroe

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