It is true that by dint of talking about recession and preparing for it, but this time….
In a text from To have to published on Monday, the Chief Economist of the Business Development Bank of Canada, Pierre Cléroux, said he believed that the recession could be avoided, but that the importance of the “anticipation” factor could not be underestimated. “Consumer spending accounts for 70% of Canada’s economic activity. How much will they cut spending over the next few months? The text quoted the results of a poll on the finances of Canadians conducted for the Bank of Montreal, which pointed out that 80% of respondents believe that Canada will enter a recession before the end of the year in Classes. In order to prepare for this, some respondents said they have put off a major purchase, whether it be a car, an appliance or a trip, while others plan to tighten their belts during the upcoming holiday season. .
If it occurs, this recession will be far from self-fulfilling. Let’s look at some numbers. Statistics Canada recently indicated that at the end of the second quarter, household net worth had fallen by 6.1% compared to the previous quarter. Or that the pace of inflationary slippage has accelerated, with the 12-month increase in inflation as measured by the Consumer Price Index (CPI) rising from 6.7% in March to 8.1 % in June. That this pressure on prices is already being felt on the savings rate of Canadian households, which fell from 9.5% to 6.2% between the first and second quarters. And that household disposable income only increased by 1% in the second quarter, while the nominal value of their consumption increased by 4.3% under the effect of generalized price increases.
All of this should be put in the context of a 125 basis point increase in the Bank of Canada’s key rate over the time horizon chosen. To say that the Bank of Canada has added 175 more since – and that it does not plan to stop there, we have already written.
In L’Labor Force Survey September, the results of which were released on Friday, Statistics Canada reports that the 12-month growth in average hourly wages of employees exceeded 5% for the fourth consecutive month, an increase of 5.2%, or 1.57 $, reaching $31.67. To add that for comparison, the 12-month growth in the CPI was greater than or equal to 7% from May to August. Without forgetting that we are talking about salary before taxes.
Earnings gains last month were fueled by year-over-year growth in the number of employees in relatively high-paying sectors. The federal agency points in the direction of construction, which recorded an increase of 109,000 jobs and an increase in the average salary of 7.5%, and the professional, scientific and technical services sector, with 56,000 jobs created and a average wage increase of 9.1%.
Inflation hurts
According to BDO Debt Solutions Trustee’s fifth Affordability Index, released at the end of September, 78% of Canadians say their personal finances have worsened due to inflation, while 54% say they live on one paycheck to another. This survey, conducted online by Angus Reid with more than 2,000 Canadians, adds that the rising cost of essential goods and services is the main factor contributing to the increase in debt for 84% of respondents. Also, 78% said spending on groceries, rent or mortgage and other essentials was the main reason they were saving less.
As for the BMO survey mentioned above, the results of the BMO Real Financial Progress Index, also released at the end of September, highlight that more than 75% of Canadians believe that their financial situation is clouded by higher grocery bills (81 %) or by the rise in the price of gasoline (76%). While 81% of respondents said they were worried about a recession by the end of the year, 77% said they were making lifestyle changes, such as delaying major purchases (34%), paying off debt (30% ) and reduce vacation spending (27%), in response to the rising cost of living.
This online survey was conducted among 3,404 Canadians aged 18 and over.