Half of Canadians feel pessimistic about the economic cycle
Personal finances remain a key cause of concern for Canadians. According to Ipsos's quarterly MNP Consumer Debt Index, 50% of respondents fear the worst is still to come and 35% say we are already in the worst portion of the economic cycle. Just 15% of people feel hopeful about the future and believe that the worst is over.
Grant Bazian, president of MNP LTD., the country’s largest insolvency firm, said, “Facing inflation as well as sharply higher interest rates on their outstanding debts, deeply indebted Canadians may be rightfully feeling that the worst is yet to come.”
According to one-third (33%) of Canadians, the economy has performed worse than they had anticipated during the past six months. Three out of 10 (30%, unchanged) Canadians say they already don't make enough money to pay their bills and make their loan payments, and almost half (46%, +1pt) say they are $200 or less away from being unable to fulfill all of their financial responsibilities.
While the number of bankrupt Canadians has remained stable, the average amount of cash that households have on hand at the end of each month has decreased slightly to $787, down $64 from the previous three months. Nonetheless, 57% of Canadians (down -2 percentage points) believe that their financial situation would worsen if interest rates rose much more. Three out of five persons (61%, -1pt) are concerned about how rising interest rates would affect their financial conditions.
“There isn’t much financial wiggle-room in many household budgets, illustrating the toll of higher interest rates, especially for those who can least afford it,” Bazian said.
With the Index rebounding to 89 points, up 12 points from the all-time low set that quarter, Bazian says that Canadians are seeing some relief from increasing interest rates. When interest rates climb, fewer Canadians are worried about their capacity to pay off debts.
However, more than half are optimistic about their ability to fund living and family costs in the upcoming year without accruing extra debt. Most Canadians (83%, -4 points) are still becoming more frugal with their spending.
“The results reveal a more positive financial outlook among Canadians, although confidence remains lower than levels recorded in 2021 and earlier: a reflection of the lingering concerns many have surrounding inflation and interest rates. For lower-income Canadians, many cannot find a financial comfort zone,” Bazian explained.
The groups most likely to be impacted by interest rate rises include Canadians with household incomes under $40K, as well as those between the ages of 18 and 34 and 35 and 54. To avoid a cycle of rising debt and interest payments, which can result in longer-term financial difficulty, Bazian recommends Canadians who are having trouble paying their expenses to immediately seek professional assistance.
“Many are hesitant to reach out for help due to the stigma of bankruptcy, which only prolongs the financial stress and can lead to more serious problems like wage garnishments and harassment by collection agencies,” he said.
