Bank of Canada data shows Canadian consumers feeling persistently negative about pretty much everything, and the single biggest pain point they cite is the 'high prices of goods and services.'Justin Tang/The Canadian Press
Canadians have never been richer and more miserable at the same time.
On paper, things aren’t so bad. Economists say we’re on track to dodge a recession this year and next. Who would have predicted that back in the spring when our closest ally launched an offensive at the heart of Canadian prosperity?
The stock market has ascended for two years almost without interruption. Household wealth is at record highs, up nearly 50 per cent since before the COVID-19 pandemic.
And still, Canadians feel terrible about their finances. The Bank of Canada’s latest consumer survey results point to a country awash in economic negativity. That’s been the case for four years now, ever since the scourge of inflation descended on a generation oblivious to its harms.
Canadians are still sticker-shocked. They haven’t forgotten how much less they were paying for the basics before the pandemic. And every time they pay their bills or visit the grocery store, they are reminded how much inflation takes from them, day after day.
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Inflation may be under control now, but the damage has been done. Look at how much food costs are up over the past six years: coffee prices have risen by 77 per cent, beef by 59 per cent, and eggs by 41 per cent.
Then you tack on the soaring costs of shelter. Rent is up by 32 per cent. Mortgage interest costs have risen by 55 per cent, while home insurance premiums are now 45 per cent higher.
So what if the data show the country has technically been spared from a recession? The average household feels like it’s already in one.
Food banks can’t keep up with demand. Consumer insolvencies are rising. And younger Canadians feel robbed of opportunities afforded to previous generations, primarily home ownership.
Last month, insolvency firm MNP Ltd. reported that three in 10 Canadians are being forced into “heat or eat” decisions – reducing spending on utilities or food purchases to save money.
“When people are cutting back on food, heat, or medical care, it’s not just about budgeting any more – it’s about day-to-day survival,” MNP president Grant Bazian said in a release.
In recent years, recession has been the economic public enemy number one. The scars of the early 1990s recession, which lasted two years and took unemployment up to 11.4 per cent, were still there.
Most Canadians didn’t have direct experience with runaway inflation on the other hand. Low inflation seemed a permanent fixture of the prepandemic economy.
That changed in 2021 when booming demand for goods collided with a global supply chain crippled by the restrictions of the pandemic. Canadian consumer prices rose alarmingly, with growth peaking at 8.1 per cent and setting off a cost-of-living crisis that persists even as inflation has been wrestled back under control.
Many Canadians got their first taste of real inflation and did not care for it one bit. Measures of consumer confidence tanked and never recovered.
Bank of Canada data shows Canadian consumers feeling persistently negative about pretty much everything: their own finances, the likelihood of missing a debt payment, their job security, and the potential for higher inflation ahead.
And the single biggest pain point they cite is “high prices of goods and services.”
What is most menacing about inflation is its universality. The pain of a recession is unevenly distributed. The newly unemployed bear the brunt. But nobody escapes the pressure of inflation.
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“If unchecked, inflation becomes less survivable than an ‘ordinary’ cyclical uptick in joblessness – the thing we used to worry about most,” Josh Brown, CEO of New York-based Ritholtz Wealth Management, wrote in a recent blog.
The cost of living was one major force that propelled Donald Trump into the White House for second time. And anger over his inability to make inflation disappear as promised is now forcing him to change tack.
Last week, Mr. Trump ordered the reversal of tariffs on beef, coffee and other food to try to quell a growing backlash.
Inflation is increasingly defining Canadian politics as well. Earlier this year, a deeply unhappy electorate was poised to toss the incumbent federal Liberals with prejudice, until Mr. Trump transformed the election with his “51st state” rhetoric.
The anger isn’t going away.
The macroeconomic data may show Canada’s economy treading water, while headline inflation has largely been tamed. But that doesn’t say a whole lot about the lived day-to-day experience of Canadians, which feels increasingly unsteady.
Editor’s note: A previous version of this article incorrectly stated that mortgage insurance costs have risen by 55 per cent. Mortgage interest costs have risen by 55 per cent.