Rising interest rates have been felt by consumers, forcing cutbacks in spend and a focus on debt. Optimistic outlooks persist, sustaining hope for growth in 2024.
Patrick Rahlfs, Senior Research Analyst
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EXECUTIVE SUMMARY
- What you need to know
- Consumer trends: key takeaways
- Moderate changes are common as consumers feel the pinch
- Graph 1: changes in managing finances due to inflation, 2023
- Consumers tighten their belts, but remain optimistic about the near-term future
- Graph 2: financial outlook for next 12 months, 2023
- 35-54 year olds juggle leisure and loans
- Graph 3: use of extra money to pay off debt, by age, 2023
- Opportunities
- Act upon young consumers' investment ambitions
- Questrade seeks to make investing less complicated
- Combined accounts can address new Canadians' goals
- National Bank of Canada offers newcomer-specific benefits
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Consumer Insights
- Effects of inflation on finances
- 60% of consumers have made at least moderate changes due to inflation
- Graph 4: changes in managing finances due to inflation, 2023
- Lower-income segments have been most affected by inflation
- Graph 5: changes in managing finances due to inflation, by household income, 2023
- Major changes due to inflation peaked among 25-34 year olds
- Graph 6: changes in managing finances due to inflation, by age, 2023
- Most new Canadians made at least moderate changes due to inflation
- Graph 7: changes in managing finances due to inflation, by new Canadians, 2023
- More than 50% of South Asian consumers have made moderate changes due to inflation
- Graph 8: changes in managing finances due to inflation, by race, 2023
- Spending behaviors
- Consumers hope to have finished cutting back on spending, look to invest more
- Graph 9: savings and spending behaviors and plans, 2023
- Travel plans may shift from domestic to international
- Graph 10: travel and large purchase behaviors and plans, 2023
- Young consumers have the most desire to increase investments
- Graph 11: putting more money into investments, by age, 2023
- While plans to invest are unanimous, ability to invest differs by income
- Graph 12: putting more money into investments, by household income, 2023
- 35-54 year olds have cut back on spend, but hope to be done
- Graph 13: cutting back on my overall spending, by age, 2023
- New Canadians look to save and invest
- Graph 14: plans to add more to savings and investments, by new Canadians, 2023
- Debt reduction remains a key focus for struggling consumers
- Graph 15: reducing non-mortgage debts, by financial situation, 2023
- Use of extra money
- Saving is the distinct top priority for extra money
- Graph 16: use of extra money, 2023
- Young consumers turn to gifts and entertainment, while dining and travel skew older
- Graph 17: use of extra money, by age, 2023
- Debt is a key focus for 35-54 year olds
- Graph 18: use of extra money to pay off debt, by age, 2023
- Higher earners balance debt with other necessities
- Travel and investment are heavily income-dependent
- Graph 19: use of extra money toward travel and investments, by household income, 2023
- Past and future financial outlook
- More consumers are worse-off compared to last year
- Graph 20: financial situation now vs a year ago, 2023
- Nearly half of 45-54 year olds are worse-off
- Graph 21: financial situation now vs a year ago, by age, 2023
- Inflation concern waned toward the end of 2023
- Graph 22: rising prices as top-three concern for next 6 months, 2022-23
- The most common inflation-impacted categories are normalizing
- Graph 23: effects of inflation, 2023
- Younger consumers are the most optimistic
- Graph 24: financial outlook for next 12 months, by age, 2023
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State of the economy
- The Canadian economy contracted in Q3 2023
- Graph 25: quarterly real GDP growth, 2021-23
- Policy rate sits at 5% heading into 2024
- Graph 26: policy interest rate, by month, 2020-24
- Inflation has subsided, but remains over 3%
- Graph 27: CPI change over last 12 months, 2020-23
- Credit card interest rates have risen, reflecting policy rates
- Graph 28: average purchase regular APR in credit card acquisition direct mail, 2020-23
- Low rates on intro periods will be valued in 2024
- Unemployment ticked up toward the end of 2023
- Graph 29: unemployment rate, 2020-23
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Appendix
- Consumer Research Methodology
- Generations
- Abbrevations and terms
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