Advice & Tips Cover Story January/February 2022 Resource Articles

Inflation Nation

Canadians struggle with rising costs, while lower-income households brace for worse in the months ahead

By Angus Reid Institute

On the cusp of throwing off the shackles of a lengthy pandemic, Canadians are already being weighed down by a significant side effect of COVID-19: inflation. What’s more, they expect the situation to worsen in the months ahead.

Nationally, the price for every component of the consumer price index (CPI)—which tracks the broad cost of living in Canada—rose 3.6 per cent compared to last year. Observers note that inflation remains within the Bank of Canada’s target range, but many Canadians are already feeling the financial pressure.

A June 2021 study from the non-profit Angus Reid Institute found that Canadians are already experiencing rising costs in their day-to-day lives. More than nine-in-ten say that over the previous six months, it became more expensive for them to improve their home through renovations (96 per cent), potentially purchase a new home (95 per cent), fill up their tank with gas (93 per cent) and buy groceries for their household (92 per cent). This, while 56 per cent of renters said their monthly cost had increased as well.

One-in-three say they’re worse off now than last year, one-in-five are better

Overall, Canadians were much more likely to say they were worse off than they were 12 months earlier (34 per cent) than to say that they are better off (20 per cent).

While the end of the COVID-19 pandemic—and the economic penalty imposed by health restrictions—is in sight, yo-yoing public health orders have caused significant job losses across the country. Canada lost 68,000 jobs in May 2021, as Statistics Canada reported a countrywide unemployment rate of 8.2 per cent.

Early 2021 figures showed the country was about 571,100 jobs short of where it was in February 2020, prior to the pandemic. Those that earn the least per hour were the hardest hit, according to a report by CIBC Economics. Part-timers, temporary workers, and the self-employed suffered the most, while higher-income Canadians experienced job gains, which is very unusual during a recession, according to the report.

The unexpected gains by the wealthy weren’t limited to the job market. Homeowners have seen their values spike. According to the Canadian Real Estate Association, the average sale price of a home increased by 31.6 per cent in March 2021 compared to a year earlier.

With all these factors in flux, for the first time since before the pandemic (and perhaps driven by those holding assets like homes and stocks), those that say they’re better off than a year ago has risen slightly, to 20 per cent. Most (45 per cent) say their financial situation is no better nor worse than it was 12 months ago. One-third (34 per cent) say they’re worse off than last year.

The economic effects of the last 12 months of the pandemic have been felt most acutely by those in lower income brackets. Those with household incomes of less than $25,000 annually (46 per cent) are twice as likely to say they’re worse off now than a year ago than those in the highest income brackets (23 per cent).

And while household income may often correlate with age, it’s notable that the youngest Canadian adults are most likely to report being both better off and worse off compared to the year before. By contrast, those over the age of 35 are far more likely to say they’re worse off than doing better.

What about the year ahead?

Canadians’ outlooks on their personal financial futures have stayed stagnant throughout the pandemic, with one-quarter (24 per cent) saying they expect to be better off a year from now and one-in-five (21 per cent) saying they expect to be worse, nearly identical to the figures from the previous three quarters. Across the country, the prairies and Newfoundland and Labrador are home to the most pessimistic Canadians. Three-in-10 of those in Alberta (29 per cent) and Saskatchewan (32 per cent) believe they will be worse off a year from now. More than one-quarter (27 per cent) in Canada’s easternmost province hold a grim view of the year ahead, while in neighbouring Nova Scotia, the outlook is brightest. One-in-four in that province expect to be better off within the next year.

Households in Canada’s lowest income brackets don’t see clouds parting on the horizon. As pandemic-era benefits move towards sunset, those most likely to receive CERB—according to Statistics Canada—face the uncertainty of re-entering a changed job market in which low-wage workers bore the brunt of the job losses.

No relief from rising prices

Statistics Canada’s May 2021 consumer price index report showed people in this country were paying 3.6 per cent more for staples than they were last May. It represents the largest yearly increase in a decade, and it’s a near-universal experience for Canadians.

Whether it’s been the squeeze of trying to fill a grocery cart with food that’s ever more expensive, or a tank of gas that won’t take them as far as it used to, these new ARI data reveal that near-unanimous majorities report feeling pressured at the cash register on all manner of expenses, from the core basics to the extras.

Confined to their houses or apartments over the past year, a precipitous rise in the cost of renovations hit many close to home. Driven in part by lumber shortages and supply chain disruptions, almost every single respondent who undertook some form of home improvement, or considered it, reported increased costs.

Consider that at least 91 per cent of residents in every region (and with an awareness of prices) reported that the cost of their weekly grocery bill rose and that an even higher number said the same about the cost of gasoline (93 per cent).

When it comes to putting concrete numbers to these increases, the Food Price Report released in early 2021 predicted that families can expect to add $695 to their annual food bill—one of the most staggering surges in the 11-year history of the report.

Among those who considered buying a car, 72 per cent noted that prices had increased. The rising price of cars was partially fuelled by a global shortage in semiconductors which short-circuited the automobile industry and which contributed to the limited availability of certain models.

While an economic recovery may have the spirits of many people rising across the country, few Canadians have any expectation that the rise in prices will level off or drop in the near future.

More than four-in-five (85 per cent) said that they expected groceries in their community to continue to become more expensive over the following six months, while nearly the same number said this of gasoline (84 per cent). Four-in-five also expect little relief from rising housing costs.

This report was originally published on angusreid.org/inflation-nation. It has been edited for length.

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