Canadians plan to spend less in 2014 than they did last year because of worries over slim pay increases, debt and retirement, even though they are marginally more confident about the state of overall economy.
A report from Toronto advertising agency Bensimon Byrne, based on an April poll of 1,500 Canadians, suggests that this reluctance to spend also stems from perceived pressure from a rising cost of living.
There is a disconnect between the movement of the consumer price index – which is currently running at about 1.5 per cent on a annualized basis – and the inflation consumers personally experience on their essential purchases, the report said. Housing, electricity, fuel and food prices seem to outpace CPI, and this is fuelling the financial concern, especially when wages are essentially flat.
“There is a perception that everything continues to cost more,” said Bensimon Byrne president Jack Bensimon. At the same time, there has been wage stagnation, so “things feel expensive because [people] don’t feel they have any more money to spend on them.”
While the results are a good sign that Canadians are trying to stabilize their personal finances and are not just living day to day, he said, that attitude could be bad for overall economy which won’t get a major boost from increased spending.
Consumer spending is a major driver for economic expansion, Mr. Bensimon said, so “other areas such as business spending or government spending are going to have to really pick up the slack if we are going to see any kind of robust growth in the economy.”
Overall, “until you start to see income levels improve, it is going to be difficult for consumers to stimulate the economy,” he said.
The survey showed that worries over personal finances are currently a bigger concern to Canadians than health care, a rare occurrence. Seventy-two per cent of those polled said they were very concerned with the cost of living, while 60 per cent said they were very concerned with access to health care.
Indeed, concerns over retirement, taxes, housing costs and financial inequality all ranked higher than health issues, the study showed.
In the decade or so that Bensimon Byrne has been doing its detailed consumer research, the only other time health was not at the top of consumer concerns was in 2009, when gas prices were top of mind, Mr. Bensimon said.
The poll asked about spending on on a wide range of specific categories of goods. Among the products on which people expect to spend less are personal electronic devices, eating out in restaurants, music, live sporting events, lottery tickets, liquor and home furnishings.
Categories that will see increased spending tend to included items where consumers have little control, or are essential, such as groceries, gas, electricity, taxes, clothing and home internet connections.
About two-thirds of the people who responded to the poll said they are trying to pay down as much debt as possible, and 57 per cent said they are being careful about spending, even if they don’t have to. About half are trying to save as much as possible.
“In short, Canadians are more concerned with stabilizing their finances than aspiring for a significantly better standard of living,” the report says.
Those surveyed were about equally divided between those who said they are are worse off than they were last year, and those who said they are better off.