With inflation showing little signs of relenting, the lion’s share of Canadians are anticipating a recession in the near future and are adjusting their spending habits accordingly.
According to this quarter's Real Financial Progress Index results from BMO, 81% of Canadians are concerned a recession will occur by year-end, and 75% say that their recessionary concerns have escalated over the past three months.
Concern is greater amongst older Canadians. In the 45 to 64 age group, 79% reported increased concerns of recession over the past three months. For the 18 to 24 age group that proportion dropped to 66%.
READ: Risk of a North American Recession Climbs Above 50%
BMO’s data also shows that 75% of Canadians have concerns over their financial momentum, with 81% attributing such concerns to higher grocery bills and 76% to rising gas prices.
As Canadians face a rising cost of living, 77% are making lifestyle changes to cushion themselves against future financial uncertainty. For instance, 34% report delaying major purchases, 30% say they are paying down debt, and 27% are scaling back on holiday-related spending.
“As the cost of living and everyday essentials rise and a possible impending recession on the way, it's understandable that Canadians' concerns are also increasing,” says Gayle Ramsay, Head, Everyday Banking, Segments & Customer Growth, Personal Banking for BMO. “It's important, now more than ever, to look at your finances, develop a budget and actively manage your cashflow to avoid unplanned expenses.”
BMO’s report also notes that this year’s findings differ from that of last year's in a few major ways.
“Compared to this time last year, significantly fewer Canadian adults are confident that they are making financial progress (down four points to 34%),” it reads. “The drop in confidence since this time last year is particularly sharp in Vancouver where confidence dropped 10 points to only 14%, saying they feel confident about their financial situation. In Toronto, confidence has dropped 5 points to 37% and Montreal remains the same at 43%.”
With that said, Canadians are reportedly more financially prepared at this stage in the game, with 72% indicating that they have a nest egg in case of emergency. Last year that figure was 68%, and last quarter, it was 67%.
Even so, BMO urges Canadians to remain vigilant about their finances, taking extra caution to track spending, review monthly payments, consult with a financial advisor, and continue to hold off on big-ticket purchases.
"Fears of a recession could become self-fulfilling, so Canadian households need to be prepared, especially if interest rates continue to rise to tame inflation," says Sal Guatieri, Senior Economist for BMO.
