Following several months of high inflation rates, this holiday season may be especially stressful for Canadians looking to cut back on spending.
A recent report published by Deloitte Canada shows holiday spending is expected to drop 17 per cent this year, to $1,520 per household. This is compared to $1,841 per household in 2021. The company’s 2022 holiday retail outlook also shows Canadians will likely spend about 10 per cent less on gifts and gift cards this year, for a total of $510.
“[This is] not a huge surprise when we think about what’s happening around us,” Marty Weintraub, a partner and national retail consulting leader at Deloitte Canada, told CTVNews.ca. “We have prices rising quickly with interest rate challenges coming, [and] there’s still some supply chain issues.”
According to Weintraub, the main reason behind this presumed pullback in spending is fear around Canada’s current economic climate. About 41 per cent of those surveyed by Deloitte Canada said their household finances have declined this year, while 48 per cent said they expect the economy to worsen in 2023. This comes as economists from the Royal Bank of Canada predict the country will enter a recession early next year.
“We have a looming economic downturn,” Weintraub said. “[Based on] public sentiment and the messaging we’re looking at, it looks like it’s going to happen … and that drives anxiety even higher.”
It can also create some tension for those eager to celebrate the holiday season after years of COVID-19 public health restrictions, said Anne Arbour, a financial educator with the Credit Counselling Society.
“There’s a desire to … get out there, to spend and to have a good time again,” she told CTVNews.ca. “But there’s also the reality of food and gas … costing considerably more.”
Weintraub and Arbour are two of several experts who spoke with CTVNews.ca about how Canadians can cut back on spending this holiday season. Whether hosting friends and family members, or purchasing gifts for loved ones, below are some tips on how to make the most of the holiday season without breaking the bank.
CREATING A HOLIDAY BUDGET
In order to limit spending this holiday season, Canadians should start by determining their existing cash-flow situation, said Kelly Ho, a certified financial planner with DLD Financial Group Ltd. based in Vancouver.
This involves identifying mandatory expenses – non-negotiable payments such as those that go towards housing, transportation and debt, for example – and discretionary costs, as well as the amount of money saved on a monthly basis.
From there, it will be easier to lay out a holiday budget based on what they’re comfortable spending on gifts, food and other expenses throughout the holidays, she said.
“When you know what your true situation is, you can be a lot more realistic when it comes to what you decide to do for the upcoming holiday season,” Ho told CTVNews.ca.
Ultimately, the goal is to spend less than what you have saved up, said Émile Khayat, a senior regional manager with TD Wealth Financial Planning.
Another useful strategy would be to look at how much money was spent over the holiday season last year, Ho said. From there, you can decide whether those same items or events still make the list, or if there are opportunities to cut back on spending.
“There’s a lot of homework involved in this but when people are in tight money situations, you have no choice,” Ho said.
GET CREATIVE WITH YOUR GIFTS
Economic challenges can present Canadians with an opportunity to come up with unique gift ideas – ones that include more than just tangible items, said Evelyn Jacks. The Winnipeg-based financial expert is the president of Knowledge Bureau, a financial education institute.
“Think about this holiday season as an old-fashioned one,” she told CTVNews.ca. “Sometimes, the best gift that we can give to one another is the gift of time.”
Instead of spending money on expensive products, Canadians can invest in shared experiences that may not cost nearly as much, Khayat said, such as going to a restaurant or spending an afternoon together. Homemade gifts can also be a cheaper alternative to buying presents for loved ones at the store, he said.
Another way to save money while gift-giving involves organizing a gift exchange between a large group of people, where each person purchases a gift for someone else, Khayat said.
“It’s definitely cheaper than buying a gift for every person,” he told CTVNews.ca.
One last option, particularly for parents, involves setting money aside for their children in a tax-free savings account or a registered education savings plan as a present. This also acts as an investment for the future, Jacks said.
“This brings an education culture to the family, where the kids know that every year, Mom and Dad are saving for me,” Jacks said. “What a wonderful gift that is.”
START PLANNING EARLY
By developing a spending plan ahead of the holiday season, Canadians can start setting aside money in advance to pay for gifts, food and other expenses throughout the holidays, Arbour said.
Deciding on which gifts to get and for whom ahead of time can also help you take advantage of bargains throughout the year, whether in-store or online, Khayat said. Additionally, by shopping in advance, you can avoid running into situations where items are out of stock due to high demand over the holidays.
When it comes to planning for the 2023 holiday season, Ho said she recommends starting as early as this January.
“Lay out the costs and average it out over 11 months to see how much you would need to save to make sure that happens next December,” she said.
Taking a strategic approach to spending can help Canadians avoid stressing about their finances, particularly when credit card bills arrive in January, said Jacks.
HUNT FOR DEALS
According to Weintraub, one tactic Canadians are likely to implement this holiday season involves purchasing gifts from brands with cheaper prices.
“Instead of buying a certain brand at a certain price point, I’m still going to buy you the same thing but I’m going to buy from a cheaper brand at a lower price point,” Weintraub said. “The choices we make will likely be towards value for now.”
The same goes for grocery store purchases, he said, particularly for those who expect to host over the holiday season. It would be wise to shop around and buy items at the lowest price possible, said Weintraub.
“Buying more store brand or private label [food products] is another way to save 10, 15 or 20 per cent right off the bat,” Weintraub said. “Canadians always love deals and bargains – there’s going to be that much more love over the next six to 12 months.”
Signing up for email alerts from stores you normally shop at is another way to stay on top of the latest deals, Khayat said. He also recommends taking advantage of loyalty programs. Points accumulated from shopping at different retailers or by using different credit cards can be redeemed for discounts, gift cards and more, Khayat said.
“There’s always ways to get that cash value from these points and use them towards something else,” he said.
AVOID USING CREDIT CARDS
Another way to limit spending over the holiday season involves making payments in cash rather than using credit, Arbour said. Doing so can help prevent you from overspending, something that is easier to do when tapping a piece of plastic versus paying with a finite amount of cash in hand, she said.
“The pain point of separating from our cash is real,” she said. “It can feel a little less concrete when we’re using credit.”
Jacks also advises Canadians to think twice before paying with a credit card during the holiday season. While using credit may allow them to pay for expenses at a later date, they should still consider whether they can afford these purchases now, she said.
“If you can’t afford to pay for these expenditures today … chances are you won’t be able to afford it when the credit card [bill] comes through,” Jacks said. “Then, what you’re going to be facing is a high interest charge on top of your expenditure.”
SHARE HOSTING RESPONSIBILITIES
For those who will be hosting guests over the holidays, one way to curb spending may be to organize potlucks, where each guest brings a different dish. This can help lift some of the burden of making food off of the host, Jacks said.
For families who may be looking to order in, splitting the cost between guests is a money-saving option as well, Ho said.
This year may also be a good opportunity to reconsider the kinds of get-togethers you’re having with friends and family members throughout the holiday season. Perhaps organizing a brunch or cocktail party instead of a formal, sit-down dinner is easier on the wallet, Arbour said. It’s also worth considering whether it’s necessary to attend these kinds of events in the first place, Ho said.
“Whip out the December calendar and see what you actually want to commit to,” she said. “You don’t have to go to everything.”
OPENLY DISCUSS EXPECTATIONS
With many Canadians feeling the pinch of high inflation and rising interest rates, it may be useful to have a conversation with friends and family about what kinds of holiday plans are affordable, Ho said.
This can involve talking to relatives about having fewer get-togethers, or speaking with friends about whether it’s actually necessary to buy gifts for their children.
“It just takes one person to break the ice … and go, ‘Hey, no pressure, everyone’s in different situations, let’s talk about this,” she said. “Because the last thing we want is for someone to get themselves into a bad [financial] situation.”
Why rent is so expensive in Canadian cities (that aren’t Toronto or Vancouver)
When rent goes up, it often goes up most dramatically in major urban centers. And, sure enough, Toronto and Vancouver have consistently been in the spotlight as rental prices have skyrocketed over the last year. A two-bedroom apartment in the Ontario capital averaged $1,765 a month in 2022, while the same place in Vancouver soared to $2,002, according to the latest Canada Mortgage and Housing Corporation (CMHC).
But it isn’t just a problem for Canada’s biggest cities.
Across the country, high-interest rates have left would-be homeowners renting rather than buying, driving up demand in the rental market. Stable youth employment has also boosted demand, as has an uptick in net migration, the report said, given that young people and new immigrants tend to rent rather than buy.
But every region has its own unique factors driving up the cost of rent, from an improved economy in the West to the impact of students returning to campus in college towns.
Here’s a look at what’s happening in some of those other rental markets.
Janice Rourke, 67, recently received a notice that rent in her downtown apartment was going up nearly 24 per cent, an increase it blamed on the rising price of utilities, maintenance and other costs. (Alberta doesn’t have a cap on rent increases, though it does limit how often rent can be raised.)
“That was a huge surprise, when I saw the amount,” said Rourke, who is currently between jobs and said it will be a struggle to afford the new monthly bill.
She’s considered searching for a less expensive place, but says the prices of nearby apartments haven’t been much better.
In Calgary, the average price of a two-bedroom rental apartment grew six per cent last year to $1,466 a month, according to the CMHC.
“It’s getting harder and harder to find safe, affordable accommodation,” said Rourke.
Existing tenants like Rourke and those on the hunt for a first apartment are facing a tight rental market in Calgary these days. Last year, the city’s vacancy rate for purpose-built rentals dropped to 2.7 per cent, its lowest since 2014 when the previous oil boom of the early 2010s lured many people to Alberta.
Rental demand has, this time, again been buoyed by a record-high level of immigration and an uptick in “in-migration” — people moving to the province from elsewhere in Canada — lured by Alberta’s relative affordability and available jobs.
“This [provincial migration] is significant, because we haven’t seen this for a lot of years,” said Michael Mak, CMHC’s analyst for the region.
What makes today different from previous boom times, Mak said, is that the current economic growth isn’t entirely linked to strong commodity prices, though those certainly played a role. Employment has also grown in other sectors, especially technology.
“Nowadays, it’s a much more diversified economy,” said Mak.
The rental market in Kitchener-Cambridge-Waterloo, a cluster of three small cities some 90 kilometres southwest of Toronto, has been tight for several years, with a vacancy rate hovering around two per cent. In 2022, it dipped even further to 1.2 per cent, the region’s lowest in two decades.
Meanwhile, apartment rental prices grew by more than seven per cent — faster growth than the nearby markets of Toronto, Guelph and London, according to the CMHC report. The average price for a two-bedroom rental is now $1,469.
Sana Banu, a recent graduate of Conestoga College and president of the students’ union, recalls moving to the region in 2018 as an international student and easily finding a room to rent near the Kitchener campus.
“[Today,] there is no availability anymore within the vicinity of the campus,” said Banu.
The return of students to campus, after so much remote learning during the pandemic, has been among the drivers of the tight rental market, according to CMHC. The region is home to Conestoga College, Wilfrid Laurier University and the University of Waterloo.
While all students contribute to demand for rentals, Banu says international students are less likely than domestic students to have family near campus, and more likely to rent while they study.
The number of international students studying in Canada has been on the rise for years, and while their numbers dipped during the outset of the pandemic, the CMHC says there’s since been a “strong rebound” of study permits issued in Ontario.
The CMHC report says a surge in permanent resident admissions in the region has also likely contributed to demand for rentals, as has employment growth in its high-tech sector.
As rental options become fewer and farther between, Banu says more students are commuting from outside the region, couch surfing or piling multiple roommates into the same bedroom. As students become more desperate, she’s also concerned they’ll also be more likely to fall for rental scams.
“There is not enough supply for the demand that we have right now,” she said.
Both international and, increasingly, inter-provincial migration have contributed to high demand for rentals in Halifax. Nova Scotia gained 17,319 people from international migration and 14,079 from within Canada between July 2021 and July 2022, according to the province’s Department of Finance.
Halifax’s recent surge of in-migrants has been due to the province’s relatively low cost of housing and its reputation for handling the pandemic, along with the growing ability of workers to do their jobs remotely, according to the city’s economic development agency.
The CMHC report says in-migrants are generally less likely to rent and more likely to purchase homes, though this, too, has contributed to the high cost of renting.
“Local residents are having to stay in rentals longer just so that they can step up to buy a home,” said Kelvin Ndoro, CMHC’s analyst for the region.
After trending down for the last few years, the vacancy rate in Halifax held steady in 2022 at one per cent, said Ndoro. Meanwhile, the cost of rent shot up by roughly nine per cent, to an average of $1,449 for a two-bedroom apartment.
Amid that record-low vacancy rate, Chris Ryan, a Halifax property manager, says he gets between three to five inquiries a day from people asking if he has any inventory available.
“We’re just growing at a pace that real estate hasn’t caught up to yet,” he said.
Halifax, like Kitchener-Waterloo-Cambridge, has an abundance of post-secondary schools. And the post-pandemic return of students to campus — and international students in particular — has contributed to demand for rentals, the CMHC report noted.
International student enrolment has been on the rise there for years (aside from a dip during the pandemic), according to data from the Halifax Partnership. The economic development agency says the share of international students attending university in Halifax has grown from about 14 per cent of enrolments in 2011-12, to about 23 per cent in 2021-22.
Kyle Cook, vice-president of advocacy for the Saint Mary’s University Student Association, says the lack of student housing has left some in a precarious position.
“Often we’re hearing … that students are renting out their living rooms, hallways,and sometimes having to share two to three people in one room,” said Cook. “It’s something that is very common, especially over the last few years since COVID.”
As more people move into Halifax, others have left for nearby communities, in search of a more affordable place to live, Ndoro says.
Some young people are opting out of the rental market altogether, he said, instead choosing to live with their parents to save money.
There are differences in what’s fuelling rental demand throughout Canada, but also plenty of similarities. As interest rates go up, it becomes more difficult to buy, pushing more people to rent for longer.
People are also moving into Canada and within it — whether for school, work or in search of an affordable place to live — leading to heightened demand in various markets, even those where inexpensive apartments have historically been fairly easy to find.
There is also one major similarity in what is expected to solve the affordability problem: more housing supply.
“[The results of this report] reinforce the urgent need to accelerate housing supply and address supply gaps to improve housing affordability for Canadians,” the CMHC report said.
Bank of Canada to publish summary of interest-rate deliberations for the first time
The Bank of Canada contemplated not raising interest rates last month but with the economy outperforming expectations, its governing council ultimately decided in favour of one more rate hike before taking a pause.
In its first-ever summary of deliberations, the Bank of Canada pointed to a tight labour market, strong GDP growth and the risk of inflation getting stuck above two per cent as the rationale for raising its key rate by a quarter of a percentage point on Jan. 25.
The summary published Wednesday outlined what the council – made up of the governor and his deputies – discussed during meetings about the rate decision.
BMO managing director of Canadian rates and macro strategist Benjamin Reitzes said the biggest revelation from the summary was that the central bank was actually considering holding its key interest rate last month, suggesting it was taking a more tepid approach than markets had thought.
“The fact that they considered not raising rates was a little bit of a surprise,” Reitzes said.
But the Bank of Canada’s rationale for raising rates was exactly right, he added, noting the economy has been running hotter-than-expected.
“We’ve seen some signs of a slowdown, but not nearly enough to really warrant extreme concern at this point,” he said.
In December, Canada’s unemployment rate was five per cent, just above the record-low of 4.9 per cent reached in the summer. Economic growth has also beat expectations toward the end of 2022.
The Bank of Canada’s rate hikes are expected to be felt more broadly in the economy this year.
The governing council unanimously agreed that the central bank’s action to date had been aggressive and the full economic effects of rate hikes have not yet been felt.
“All governing council members acknowledged they were approaching this decision with a similar view: that the bank’s monetary policy to date had been forceful and that the full impact would be felt in quarters to come,” the summary said.
The central bank has hiked its key rate eight consecutive times since March 2022, bringing it from near zero to 4.5 per cent. That’s the highest it’s been since 2007.
With the first rate hike of the year, the central bank indicated that it would take a conditional pause to assess how the economy is responding to higher rates.
The summary also revealed that the Bank of Canada is concerned inflation might be stickier than expected.
“Persistence in supply chain challenges, services price inflation, wage growth and inflation expectations could all keep inflation above the target,” the summary said. “A rebound in oil prices could also push inflation back up again.”
Headline inflation has fallen from its peak of 8.1 per cent seen in June to 6.3 per cent in December. The Bank of Canada is forecasting the annual inflation rate will fall to three per cent by mid-2023 and to its two per cent target in 2024.
According to the summary, after some deliberation on what forward guidance the central bank should give, governing council members were in broad agreement to signal a pause to convey that the bar for raising rates further is now higher.
Reitzes said the summary makes it clear that a rate hike in March is “off the table.”
The release of the five-page summary follows a recommendation from the International Monetary Fund to increase transparency about the rate decision process.
It also provides a glimpse into what the Bank of Canada’s governing council considers when making policy decisions, something economists and forecasters often try to understand.
Reitzes said the summary was a welcome addition and “provided a little bit more colour around the policy decision.”
As the Bank of Canada monitors how the economy reacts to higher borrowing costs, the summary shows it is closely watching global and domestic economic developments.
The council spent a “considerable” amount of time discussing the potential effects of China lifting COVID-19 restrictions, according to the summary, with a particular concern about the effect the reopening could have on oil prices.
“If Chinese demand were to rebound by more than anticipated, oil prices could rise substantially, putting renewed upside pressure on Canadian and global inflation,” the summary said.
Domestically, the governing council noted declines in consumption and housing activity indicate the economy is slowing.
However, Statistics Canada’s preliminary estimate for real GDP in the fourth quarter suggests higher growth than the Bank of Canada’s previous expectations.
The central bank has also said Canada’s tight labour market is a sign of an overheated economy. In December, the unemployment rate was five per cent, just above the record-low of 4.9 per cent reached in the summer.
But the council is still encouraged by signs of inflation slowing.
In the summary, the council acknowledged that much of that slowdown is the result of lower gasoline prices, but members noted the decline in durable goods inflation suggests higher interest rates are working to slow demand.
This report by The Canadian Press was first published Feb. 8, 2023.
Ship-To-Ship Loadings Of Urals Hit Record High As Russian Oil Heads To Asia
Loadings of Russia’s flagship Urals crude using ship-to-ship (STS) transfers in the Mediterranean surged eight times in January from December to a record in the first full month in which the EU banned seaborne imports of Russian oil.
STS loadings, used by traders to move the crude from smaller tankers onto larger ones to make the journey to Asia profitable, have soared since the EU ban came into effect on December 5, according to data from Refinitiv Eikon cited by Reuters on Tuesday.
The key STS loading points in the Mediterranean are near Kalamata in Greek waters and near the Spanish port of Ceuta in the Strait of Gibraltar.
STS loadings in the Mediterranean hit an all-time high of 1.7 million tons in January, an eightfold surge compared to December, per Refinitiv Eikon data and Reuters calculations.
Since Urals is no longer being imported into the EU, cargoes are being diverted to Asia, mostly to India, China, and Singapore.
While the Urals crude is now finding a home outside Europe, the low price of Russia’s flagship grade is reducing Russian revenues from oil, due to the steep discount at which Urals trades relative to Brent Crude.
Russia’s budget revenues from oil and gas plunged in January by 46% compared to the same month last year. Russian budget revenues from energy sales – including taxes and customs revenues – plummeted last month to the lowest level since August 2020.
In January 2023, the price of Urals grade averaged 42% lower than in the same month of 2022, as its discount to Brent Crude grew wider following the EU embargo and the G7 price cap, which came into effect on December 5. The average price of Urals in January, at $49.48 per barrel, was 1.7 times lower than in January 2022, when it averaged $85.64 per barrel, Russia’s Finance Ministry said last week.
Russia is considering taxing its oil firms based on the price of Brent – instead of Urals – to limit the fallout on the Russian budget revenues due to the widening discount of Urals to Brent, Russian daily Kommersant reported last week, quoting sources.
By Tsvetana Paraskova for Oilprice.com
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