Poll findings show consumers curbing their spending as fears of an economic downturn hold sway
Consumers in Canada are becoming more prudent about their finances as the economic crisis triggered by the novel coronavirus deepens.
In an online survey of over 1,500 Canadian adults, CIBC found eight tenths (79%) are concerned about continued recessionary conditions next year, in contrast to 55% who cited fears of an economic downturn in a December 2019 survey.
Almost half (46%) reported that the pandemic’s economic impact has taken a toll on their finances, and 74% said the current uncertainty makes planning for the future difficult. An attitude of defensiveness has taken hold, with nearly two thirds of respondents (63%) said they have cut down considerably on their discretionary spending, and 55% agreed they need to be more conscientious with respect to their finances this year.
When respondents were asked to name their financial goals for the rest of 2020, generally saving as much as possible (37%) emerged as the top answer, followed by avoiding taking on additional debt (36%). Among the 22% who said they’ve had to increase their borrowing in the past 12 months, the most prominent reasons were to pay for day-to-day items (38%) and loss of income (28%).
Data on Canadian consumer behaviour also reflects a state of increased concern for their financial future. Based on data analytics going back to January, Equifax Canada said that credit card balances among adults under 35 have declined by 16%, while adults 35 and older saw theirs fall by under 12.6%.
Payment deferrals were also being used more frequently by younger adults: 6.73% of account holders under 24 and 6.69% of those between 25 and 34 years old have deferred payments since January, compared to 5.2% among the 45-54 age group.
Through a survey conducted under a partnership with Equifax Canada, behavioural research firm BEworks found that younger adults are less vulnerable to a harmful mentality that has been made more likely by COVID-19.
“COVID-19 has created the perfect storm for Canadians to experience a scarcity mindset,” said BEworks CEO and co-founder Kelly Peters, who explained that the feeling of not having enough money, time, or social companionship can sap mental stamina and make people more susceptible to cognitive biases like loss aversion and present bias.
The keener focus on restraint among millennials may be driven in part by a generally more precarious debt situation. Aside from being more likely to feel their job is at risk because of COVID-19 (42% vs. 25% of respondents 35 and older), they were more likely to report limiting their spending as they already have too much debt (41% vs. 32% of older respondents); cite concerns about their ability to keep up with mortgage payments (30% vs. 17%); and say that the government assistance they get won’t cover all their bills (25% vs. 18%).
The CIBC poll and the Equifax survey showed slightly different pictures of economic confidence among Canadians. While 47% of the participants in the CIBC study estimated they would need more than a year to regain their personal financial footing, 47% of those polled by Equifax expected their personal household finances to stabilize within the next six months.