More than half of Canadians say inflation making it harder to afford things

More than half of Canadians (53%) say the rising cost of goods and services is making it more difficult to afford things, according to recent survey from EY Canada.

Facing increasing pressure from rapid inflation, 61% of Canadians plan to save for the future instead of spending on non-essentials, according to the consulting firm’s Future Consumer Index Survey.

Low-income consumers were, unsurprisingly, the likeliest to say inflation is impacting their ability to afford goods, at 81%. The increased cost of food, rent, and transportation eats into their already more limited capacity to buy non-essentials, since essential categories take up a larger portion of their total budget than wealthier consumers. Meanwhile, low-income Canadians are highly unlikely to be profiting from the housing bubble or stock market growth like middle-class and high-income Canadians. They also categorically cannot hold high-earning jobs in high-growth industries such as technology, which are likeliest to have significantly increased wages to retain and attract talent amid the pandemic crunch and inflation crisis.

Nevertheless, middle-class (50%) and high-income (35%) Canadians also reported being squeezed by inflation.

With their spending power being eroded, Canadians said they would spend less on non-essentials such as clothing (40%), beauty and cosmetics (37%), and big-ticket items (34%). Aside from purchasing fewer non-essentials, many Canadians are also trading down to cheaper private label alternatives for fresh food (58%) and packaged food (63%).

Meanwhile, the legacy of the pandemic continues to impact consumer habits. In the last two years most consumers have spent less and gone out less. According to the global EY Consumer Index, 56% say they are less likely to go out unless they have to, and if they do go out, 63% are choosing to spend time in their local area. Social circles have shrunk, with 74% not seeing friends and family as much as before the pandemic.

“The fabric of daily life has shifted in many ways — from where people travel and seek entertainment, to how they work and meet their needs. These significant shifts, coupled with inflation, are driving consumers at all income levels to change their shopping behaviours and rethink purchase decisions,” said Lokesh Chaudhry, EY Canada consumer co-leader.

Though 37% of Canadians told EY they are prioritizing experiences over physical goods, two-thirds prefer at-home experiences – placing more pressure on companies to deliver digitally.

“In line with the growing desire for simplicity and flexibility, the most appealing experiences will be those that are easy to access and take minimal time investment — that means more digital touchpoints, frictionless brand experiences, and personalized consultations in the metaverse,” Chaudhry added.