It appears that a growing number of Canadians are focused on either paying down debt or increasing their level of savings during the pandemic, rather than spending their income.
According to a survey by Nanos Research Group and Bloomberg, three in four Canadian households said their top financial priority was to reduce their level of debt or maintain a higher level of savings. Only 11% of respondents revealed that they planned to make major purchases. Indeed, since the onset of the economic downturn in March and April, the incomes of a growing number of Canadians have improved, thanks in large part to government support programs related to the pandemic, high real estate prices and stock market growth.
The improvement in personal finances stems from the numerous income and credit support programs introduced by Prime Minister Justin Trudeau at the start of the pandemic, boosting average disposable income by about $100 billion over the first nine crisis month. Meanwhile, household spending fell by more than $50 billion over the same period, resulting in $150 billion in net new savings that went unspent. According to Statistics Canada, the Canadian household savings rate remained high at 14.6% in the third quarter of 2020.
In addition to skyrocketing savings levels, the ongoing housing boom has made many Canadians wealthier. According to Statistics Canada, household net worth increased by more than $600 billion in the first six months of the pandemic. However, improving household finances are worrying some government officials, with Finance Minister Chrystia Freeland examining possible ways to free up spending to spur economic recovery.
Information for this briefing was found via Nanos Research, Bloomberg and Statistics Canada. The author has no security or affiliation related to this organization. Not a buy or sell recommendation. Always do additional research and consult a professional before purchasing a title. The author holds no license.