Canadians facing financial pressures ahead of the Bank of Canada decision

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Having exhausted their savings, Canadians are now struggling on a series of financial fronts, according to the latest reading from an ongoing poll that is being released on the eve of the Bank of Canada’s interest rate decision.

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The Maru Household Outlook Index (MHOI) for June found that Canadians’ personal financial position is worse than in the previous month, that is more likely to declare bankruptcy and that saving for retirement has been pushed firmly to the back burner for a rising number of people.

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“Everyone who has experienced a change in their wallets is saying they are worse off and it’s not dominated by any particular group and the pain is being felt across the board,” said John Wright, executive vice-president of Maru Public Opinion, the company that compiles the MHOI.

The June results, conducted from June 30 to July 3, showed that 11 per cent of those surveyed would consider declaring bankruptcy over the next sixty days, “up smartly” from nine per cent the previous time the survey was run. The new figure tied with the second highest rating since tracking started in July 2000, the firm said in a press release. Further, a larger number described their personal financial position as worse compared to the month prior, except for a group of younger Canadians who indicated their finances were improving.

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“Everyone else in every part of the country is feeling worse off,” Wright said.

Everyone else in every part of the country is feeling worse off

John Wright

The Bank of Canada meets July 12 and the expectation is that it will raise its benchmark lending rate another 25 basis points to five per cent. In March 2022, rates stood at 0.25 per cent but they have risen rapidly over the past year and a half in an attempt to curb inflation.

Since then, evidence has built that Canadians are struggling mightily with the cost of living and higher interest rates, as evidenced by rising rates of consumer insolvency.

The survey found that fewer people said their financial situation remained the same at 60 per cent down from 65 per cent previously “with the rest proportionately believing they’re worse off,” Maru said in the press release.

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Broken down by age group, the Maru poll revealed that 33 per cent of those aged 35-54 said they were worse off financially in June than May, meanwhile 29 per cent of those aged 55 and over also said their personal finances had deteriorated.

Saving for retirement has also taken a major hit, recording the worst result since Maru began tracking that poll question.

Forty-two per cent of people said they were saving for retirement, down seven percentage points from the month before. When the index began in April 2021, 56 per cent of Canadians indicated they were putting money aside for their non-working years.

Those financial struggles naturally spilled over into the household index, which fell for the first time in three months to a reading of 86.

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The base number for the index is 100. A result above 100 indicates optimism and below, pessimism. Maru compiles its household index each month by asking a panel of about 1,500 people a series of questions about the economy’s prospects over the next 60 days.

Only five of the 16 measures used to create the Maru Household Outlook Index (MHOI) improved in the latest version, Maru said, indicating how much of a funk Canadians are in when it comes to the economy and their finances.

Just 38 per cent of respondents said they believed the economy was moving in the right direction, up slightly from the previous month. However, only 36 per cent indicated they thought the economy would improve, down from 38 per cent the month before.

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There were other signs of financial stress among survey participants:

Four in 10 (42 per cent, up two percentage points) said they did not expect to earn a livable wage over the next 60 days; 30 per cent, up one percentage point, indicating they are expected to rely on government programs to make ends meet; and one in five (20 per cent, up one percentage point) said that they likely will not be able to keep a roof over their family’s head.

“The bank may raise rates a quarter point but what is the bank trying to accomplish? Is it trying to force people out of their homes?” said Wright.

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