This discrepancy prompts the question: Why are Canadians’ sentiments so at odds with economic indicators? As economists, we have identified several reasons that explain why this gap exists.
In contrast, the number of people in the low-income cutoff group keeps increasing. Net saving for the lowest income households decreased by 9.8 per cent in the third quarter of 2023 compared to the previous year.
2. Debt servicing burdens
Since the onset of the pandemic, net savings have deteriorated for all except those with the highest incomes, as renters and lower-income families tend to spend more than they make on necessities.
Canada currently holds the highest amount of household debt as a percentage of disposable income among all G7 countries. With the current high interest rates, the burden of interest payments for households as a percentage of disposable income recently reached its highest level in 12 years.
3. Interest rates
The average disposable income for the top 20 per cent of Canadians is increasing at the fastest rate of any income group. This means those with financial assets benefit from rising interest rates, while those at the bottom suffer from the burden of greater debt service.
4. Housing costs
Skyrocketing housing prices have outpaced income and mortgage rates have gone up dramatically, resulting in the lowest home affordability index in the last 40 years. The dream of home ownership seems more distant than ever for many.
A person walks past multiple for-sale and sold real estate signs in Mississauga, Ont., on May 24, 2023. Skyrocketing housing prices have outpaced income in Canada. THE CANADIAN PRESS/Nathan Denette
Canada’s most concentrated industries have become even less competitive, and the number of highly concentrated industries is growing. Profit margins and markups of already profitable firms is increasing.
This trend negatively impacts consumers and broader society by reducing industry dynamism, resulting in fewer choices and higher costs.
The prevalence of some chronic conditions, including high blood pressure, heart disease and obesity, increased from 2015 to 2021 as well.
Financial anxiety, pandemic-related stress and other issues are making Canadians feel angrier in general, which affects their outlook on life and the economy.
8. Long COVID
While the impacts of the pandemic are slowing down, long COVID is still a significant issue for many. One in nine people who contracted COVID-19 suffer from symptoms, including brain fog, cognitive impairment, fatigue and shortness of breath, that affect their health and well-being.
It is shortsighted to assume we have all recovered equally from the pandemic when some people are still being affected by it.
A nurse draws a dose of the COVID-19 vaccine into a syringe at a vaccination clinic in Surrey, B.C., on May 17, 2021. While the impacts of the pandemic are slowing down, long COVID is still a significant issue for many. THE CANADIAN PRESS/Darryl Dyck
The financial situation of many colleges is increasingly precarious, meaning post-secondary institutions could end up raising tuition fees or rely more on international students to meet their budgets, both of which affect domestic students.
Students from the lowest economic stratum will increasingly find it difficult to trade the security of a job right out of high school for the high cost of a university or college degree. This, in turn, will reduce their chances to move up in the socio-ecnomic ladder.
10. Youth struggles
Youth across North America are more anxious about their future, concerned about their mental health and educational prospects and more disillusioned by politicians than previous generations.
A 2023 survey from the Globe and Mail found that nearly three-quarters of Gen Z disagreed that, as a generation, they would surpass their parents. Fifty-six per cent feel afraid, sad, anxious and powerless about climate changes, while 78 per cent reported that climate anxiety is impacting their mental health.
Navigating the disconnect
While more than 40 per cent of Canadians hope for positive outcomes in 2024 and the macroeconomic indicators show prosperity, there exist numerous factors causing dissatisfaction in large swathes of the population in Canada.
Managers, business leaders, policymakers, government officials and economists should all care deeply about this issue. Over-relying on aggregate indicators — like macroeconomic prosperity — while making strategic, investment, hiring and financing decisions could lead to unexpected outcomes and challenges.
For example, a real estate company might decide to invest in a large, low-end housing project based on economic numbers. While the initial logic may seem sound — if the economy is doing well, that there should be a huge demand for housing — issues might arise if the target population is financially strained and unable to afford the housing.
A comprehensive understanding of the mindset, risk preferences and motivating factors of key customers, stakeholders, investors, employees and voters is essential for making well-informed decisions that benefit all parties involved.
FREDERICTON – New Brunswick‘s finance minister says the province recorded a surplus of $500.8 million for the fiscal year that ended in March.
Ernie Steeves says the amount — more than 10 times higher than the province’s original $40.3-million budget projection for the 2023-24 fiscal year — was largely the result of a strong economy and population growth.
The report of a big surplus comes as the province prepares for an election campaign, which will officially start on Thursday and end with a vote on Oct. 21.
Steeves says growth of the surplus was fed by revenue from the Harmonized Sales Tax and federal money, especially for health-care funding.
Progressive Conservative Premier Blaine Higgs has promised to reduce the HST by two percentage points to 13 per cent if the party is elected to govern next month.
Meanwhile, the province’s net debt, according to the audited consolidated financial statements, has dropped from $12.3 billion in 2022-23 to $11.8 billion in the most recent fiscal year.
Liberal critic René Legacy says having a stronger balance sheet does not eliminate issues in health care, housing and education.
This report by The Canadian Press was first published Sept. 16, 2024.
OTTAWA – Finance Minister Chrystia Freeland says the government is making some changes to mortgage rules to help more Canadians to purchase their first home.
She says the changes will come into force in December and better reflect the housing market.
The price cap for insured mortgages will be boosted for the first time since 2012, moving to $1.5 million from $1 million, to allow more people to qualify for a mortgage with less than a 20 per cent down payment.
The government will also expand its 30-year mortgage amortization to include first-time homebuyers buying any type of home, as well as anybody buying a newly built home.
On Aug. 1 eligibility for the 30-year amortization was changed to include first-time buyers purchasing a newly-built home.
Justice Minister Arif Virani is also releasing drafts for a bill of rights for renters as well as one for homebuyers, both of which the government promised five months ago.
Virani says the government intends to work with provinces to prevent practices like renovictions, where landowners evict tenants and make minimal renovations and then seek higher rents.
The government touts today’s announced measures as the “boldest mortgage reforms in decades,” and it comes after a year of criticism over high housing costs.
The Liberals have been slumping in the polls for months, including among younger adults who say not being able to afford a house is one of their key concerns.
This report by The Canadian Press was first published Sept. 16, 2024.
OTTAWA – Statistics Canada says manufacturing sales rose 1.4 per cent to $71 billion in July, helped by higher sales in the petroleum and coal and chemical product subsectors.
The increase followed a 1.7 per cent decrease in June.
The agency says sales in the petroleum and coal product subsector gained 6.7 per cent to total $8.6 billion in July as most refineries sold more, helped by higher prices and demand.
Chemical product sales rose 5.3 per cent to $5.6 billion in July, boosted by increased sales of pharmaceutical and medicine products.
Sales of wood products fell 4.8 per cent for the month to $2.9 billion, the lowest level since May 2023.
In constant dollar terms, overall manufacturing sales rose 0.9 per cent in July.
This report by The Canadian Press was first published Sept. 16, 2024.
