Nearly Half of Canadians say Household Finances are Worse than Anticipated as Consumer Inflation Concerns Hit Highest Level Since Q2 2022 – TransUnion Study

52% of Canadian consumers surveyed intend to cut discretionary spending as they navigate a high cost of living, with 86% saying inflation is in their top three household financial concerns, reveals TransUnion’s quarterly survey.

Q2 2024 TransUnion Canada Consumer Pulse study key findings:  

• 57% of Canadian households said their incomes are not keeping up with the current rate of inflation.
• 38% expect payments for bills and loans to increase over next three months.
• Over a quarter (27%) of Canadians plan to apply for new or refinance existing credit in the next year.
  

TORONTO, July 09, 2024 (GLOBE NEWSWIRE) -- TransUnion’s most recent Q2 2024 Consumer Pulse study reveals that financial optimism is low among Canadians, with over half (58%) reporting that they are not optimistic about the state of their household finances over the next 12 months. A further 65% of study respondents indicate that they feel Canada is currently in a recession or will enter one before the end of 2024. An even higher percentage, 86%, say inflation is in their top three household financial concerns over the next six months – the highest percentage since TransUnion began tracking it quarterly in Q2 2022. This economic cycle could be the driver of increased demand for credit, with over a quarter (27%, up four percentage points from Q1 2024) of Canadians saying they plan to apply for new or refinance existing credit in the next year, potentially reflecting the need for additional liquidity.

Almost half (46%) of Canadians say that their household finances are worse than planned at this point in 2024, up four percentage points from a year ago. This is despite 79% of Canadians who reported that their income either stayed the same or increased in the last three months. In comparison, 21% reported that their household income decreased in the last three months and 40% expect their household income to increase in the next year. While the study finds that the majority of Canadians say their income has either stayed the same of increased, 57% feel their income is not keeping up with the rate of inflation.

“While income levels are holding steady overall, our data indicates that cost of living increases continue to put pressure on household finances and are fueling a decline in financial optimism among Canadians. Many Canadians are tightening spending and looking to take on more credit to help with cash flow. With the Bank of Canada recently lowering the prime interest rate for the first time in four years we may see some of these trends around taking on new credit or refinancing existing loans accelerate,” said Matthew Fabian, director of financial services research and consulting. “This is especially likely for younger Canadians, who indicated that interest rates play a larger factor in their decision to take on new credit.”

Other key findings of the study include:

Canadians feeling the strain of increased cost of living

Low (61%) and medium household incomes (57%) and older Canadians say their household incomes aren’t keeping up with inflation the most, with 66% of Gen X and 60% of Baby Boomers indicating this. Many Baby Boomers and some Gen Xers are at or near retirement, meaning they may have fixed retirement incomes which increases the pressure of inflation.

As this pressure rises, consumers must make trade-off choices as to where money is directed. Essential goods such as groceries and gas tend to be considered as spending priorities, potentially leaving less disposable income available to cover credit debt. As seen in the most recent TransUnion Consumer Industry Insights report, 1.3% of Canadians are only paying the minimum balance in their credit card.

Shifts in saving patterns and taking on more debt

Despite some Canadians only making minimum payments on their credit cards, there was a four-percentage-point increase in the number of Canadians who say they paid down debt faster in the last three months, when compared to Q1 2024.

Other ways Canadians reported they adjusted their saving patterns in the last three months include:

• Saving more in their emergency fund (17%)
  • This increases significantly for Gen Z (28%)
• Cutting back on saving for retirement (16%)
• Increasing usage of available credit (16%)
• Using their retirement savings (11%)
• Saving more for retirement (10%)

Canadians anticipate shifts in household spending

Canadians are showing concern about the increased cost of goods for non-discretionary items saying they were most concerned with the increased cost of:

• Groceries (89%)
• Gasoline for cars (61%)
• Utilities (52%)
  

In the next three months, Canadians are anticipating their spending habits to accommodate the rising cost of living. While over a third (38%) expect to increase the amount they pay for bills and loans, over half (52%) said they’ll cut back on discretionary spending (dining out, travel and entertainment). In fact, 57% say they already cut back on discretionary spending in the last three months, and a significant percentage say they canceled subscriptions or memberships (29%) and canceled or reduced digital services (24%) in that timeframe.

Interest rate levels impact appetite to take on more debt
Nearly two-thirds (62%) of Canadians indicate that rising interest rates have a high or moderate impact on whether they’ll apply for new credit in the next 12 months. This percentage increases among Gen Z at 77% and Millennials at 74%, compared to 59% of Gen X and 47% of Baby Boomers.

Nearly one in three Canadians struggling to pay their bills and loans in full
Thirty percent of Canadians report that they expect to be unable to pay at least one of their current bills and loans in full meaning some may need to tap into savings or take on additional credit to pay these balances. Among those who said they couldn’t pay at least one current bill and loans in full, 35% intend to pay a partial amount they can afford.

Other ways Canadians said they plan to help pay their currents bills and loans among those who said they couldn’t pay at least one:

• Nearly one-third (32%) of Gen Z plan to use their available credit card.
• Nearly a quarter (23%) of Gen X don’t know how they’re going to pay for their bills/loans.

Of those planning to take on more debt, 69% say they’ll either apply for a new credit card or increase available credit on their existing card
Of those who plan to take on new or refinance existing credit in the next 12 months, nearly half (47%) expect to apply for a new credit card and 22% say they’ll increase available credit on their existing credit card. This is despite a historic record of 31.5 million Canadians holding at least one credit product (an increase of 3.75% YoY).

Other forms of additional credit that Canadians plan to apply for in the next year include:

• New personal loan (20%)
• New car loan or lease (18%)
• Refinance mortgage, home loan or bond payment (17%)
• New mortgage (15%)
• New buy now, pay later payment services (12%)
• New home equity line of credit (11%)
• Refinance car loan (10%)
  

Gen X is feeling the most financial strain
Gen X appears to be the most stressed about their financial situation, with 53% reporting their household finances are worse than expected – the highest among generations surveyed. This can potentially be attributed to them carrying a large amount of debt like mortgages, and some nearing retirement. As noted earlier in this press release, this age group had the highest percentage (66%) of Canadians who said their incomes are not keeping with the current inflation rate.

Over a third (35%) of Gen X surveyed don’t expect to be able to pay at least one of their current bills and loans in full, higher than the 30% overall. This could again be attributed to the large amount of debt this generation is carrying.

Despite concern around interest rates and rising cost of living, Canadians still believe in the importance of credit

Canadians overwhelmingly see the value of credit, with 87% saying that access to credit and lending products is important to achieve their financial goals. However, over half (52%) believe they don’t have sufficient access to these products.

Of all age demographics, only Baby Boomers (71%) report a majority of respondents believe they have sufficient access to credit and lending products.

The complete Consumer Pulse study can be viewed here.

*The most recent Consumer Pulse study includes a survey of 1,000 Canadian adult consumers conducted May 1-10, 2024.    

About TransUnion^® (NYSE: TRU)
TransUnion is a global information and insights company with over 13,000 associates operating in more than 30 countries, including Canada, where we’re the credit bureau of choice for the financial services ecosystem and most of Canada’s largest banks. We make trust possible by ensuring each person is reliably represented in the marketplace. We do this by providing an actionable view of consumers, stewarded with care.

Through our acquisitions and technology investments we have developed innovative solutions that extend beyond our strong foundation in core credit into areas such as marketing, fraud, risk and advanced analytics. As a result, consumers and businesses can transact with confidence and achieve great things. We call this Information for Good^® — and it leads to economic opportunity, great experiences and personal empowerment for millions of people around the world.

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