Canada, like many other countries, has experienced a significant rise in inflation over the last several months. According to Statistics Canada, inflation has ranged between 5.1 and 8.1 percent on a monthly basis so far in 2022
(Statistics Canada, 2022)
. This increase in inflation is the highest it has been since 1983 and is resulting in a corresponding increase in interest rates which adds pressure to consumers budgets. A public polling company, Angus Reid, is quoted in a Canadian Mortgage Professional article as saying 80% of Canadians have reduced spending due to the increased cost of goods (Vecina, 2022)
. Discretionary spending has been reduced as more and more of monthly budgets are put towards staple consumables such as food or fuel. Major purchases are being delayed because of reduced budget flexibility. Other disbursements such as charitable donations, travel or even future saving are being reduced or eliminated in the face of rising expenses
(Vecina, 2022)
. Three quarters of Canadians admit to being stressed financially and over half say they cannot meet the cost of living (Vecina, 2022)
. Many Canadians submitted that an unexpected expense of more than 1000 dollars would be financially unmanageable for them to cope with at the moment (Vecina, 2022)
. If
they were lucky enough to gain a windfall of 5000 dollars, almost 40% of those polled would use
it to reduce debt. Another 10% would have to use it to meet immediate expenses (Vecina, 2022)
. With monthly budgets under such tight pressure, an increase in interest rates creates a second burden on consumers. Increasing prices for goods and increasing prices for debt are straining consumers wallets and resulting in a slowing economy. This reduction in demand will ease pressure on prices eventually and push the economy towards equilibrium. Hopefully.
