Bracing for a Possible Recession, 34% of Canadians Build Up Savings, Following a Record High in Stockpiled Savings Through the Pandemic; 54% Cut Discretionary Spending, Reveals TransUnion Study

More than half (55%) of Canadians surveyed say their incomes aren’t keeping up with inflation – despite 24% reporting an income increase and 34% who anticipate an increase

Q2 2023 TransUnion Canada Consumer Pulse study key findings:

  • Top 3 financial concerns: inflation (47%); increasing house prices (14%); possibility of recession (11%)
  • 32% anticipate being unable to pay their current bills and loans in full
  • 15% of Canadians cut back on retirement savings
  • 37% said large purchases will decrease significantly
  • 24% plan to apply for credit or refinance in next 12 months
  • 42% are optimistic about their financial outlook over the next 12 months
  • 48% targeted by fraud over last 3 months
  • 85% feel it’s important to check credit reports

TORONTO, July 10, 2023 (GLOBE NEWSWIRE) -- TransUnion’s most recent Consumer Pulse study* shows that almost half (43%) of Canadians felt their household finances were worse than planned. Nearly a third (32%) anticipate they will be unable to pay their bills and loans in full, of which 22% plan to borrow from a friend or family member to help pay them off. Around one third (36%) of study respondents believe that Canada is currently in a recession, and 27% believe that Canada will enter a recession in the second half of 2023. These prevailing concerns over financial headwinds and threat of a possible recession is affecting consumer spending, saving behaviours and appetite for taking on more debt, reveals TransUnion’s new study.

“While there is a mixed level of confidence in Canadians’ financial outlook, macroeconomic pressures remain top-of-mind for many,” said Matt Fabian, director of financial services research and consulting at TransUnion Canada. “Concerns around inflation, rising interest rates, housing affordability, and the perceived threat of a potential recession are affecting how Canadians are managing their household finances. Overall, the study indicates that Canadians are taking a prudent approach in managing their finances in the face of economic uncertainty, including reining in spending, stockpiling savings, and managing their debt levels. Not just in view of today’s financial challenges – but in preparing for what’s ahead.”

Canadians brace for a potential recession by stockpiling savings.
Canada saw record levels of stockpiled savings throughout the pandemic; while much of these savings have since been utilized, Canadians still appear to be in savings mode.

  • Over one third (34%) said they are preparing for a possible recession by building up savings.
  • Gen Z and Millennials are more likely to build up savings at 50% and 39%, respectively.
  • More than a third (36%) of Canadians say they believe Canada is currently in a recession; this compares to 27% who report they do not believe Canada will enter a recession before the end of 2023.

Inflationary and interest rate pressures dominate Canadians’ financial health concerns.
Cost-of-living price increases continue to impact consumers with just over half (57%) who feel their household finances are as good or better than planned; down slightly from 59% in Q2 2022. Conversely, 43% report that their household finances are worse than planned.

Macroeconomic pressures impact spending behaviours.
One in four Canadians (24%) report having had an income increase over the last three months; just over half (54%) report their income level stayed the same, and 23% say their income decreased. A further 34% anticipate their income will increase over the next 12 months.

While steady or increasing income levels may help mitigate the effects of inflation and increased debt levels, concerns over cost-of-living and interest rate increases continue to impact spending behaviours for many consumers. Shifts in household spending included:

  • Cutbacks on discretionary spending (54%); versus increase (10%)
  • Canceled or reduced digital services (21%); versus increase (7%)
  • Canceled subscriptions or memberships (26%); versus added (6%)

Rising interest rates impacting Canadians approach to debt and savings management.
Debt levels are a key concern for Canadians, with higher interest rates affecting decisions to apply for additional credit or refinance in the next 12 months (57%). Almost a quarter of Canadians (24%) indicate they plan to apply for credit or refinancing in the next 12 months. Of those who plan to apply, credit cards are the most common product (46%), followed by personal loans (26%) and mortgages (18%).

There has been an increase in inquiry volumes, especially for below Prime consumers (those who may have lower credit scores and considered higher risk for lenders) who may be seeking additional credit to help manage short-term cash flow or liquidity challenges.

Other shifts in how Canadians are managing debt and savings over the last three months include:

  • Saved more in emergency fund (19%)
  • Pay down debt faster (17%)
  • Cut back on savings for retirement (15%); versus saved more (12%)
  • Increased usage of available credit (13%)
  • Used retirement savings (8%)

Mixed level of consumer confidence for financial outlook.
While 42% of Canadians are optimistic about their finances over the next 12 months (up 2 percentage points from Q2 2022), the study indicates that 31% feel pessimistic about their financial outlook. Optimism is strongest among Boomers (up 10%) and weakest among Millennials (down 5%).

Despite this optimism, 55% of Canadians don’t feel their income is keeping pace with the rate of inflation. Inflationary pressures are the number one concern affecting household finances over the next 6 months for 47% of Canadians, followed by increasing house prices (14%) and possibility of a recession (11%).

While 68% of Canadians say they expect to be able to pay their bills in full, the study indicates that nearly one third (32%) are not confident in their ability to pay their bills in full. Of this group, 38% plan to just pay partial payments, and 22% plan to borrow from a friend or family member to help pay their bills or loans.

Canadians leverage credit monitoring to fight an increase in fraud attempts.
While almost half (48%) of surveyed Canadians say they were targeted by a fraud scheme in the last 3 months, 80% are concerned about cyber security threats. Credit card fraud (51%) and identity theft (49%) are the two biggest cyber threat concerns among Canadians. However, 39% report not having taken any action in response to their threat concern. Almost half of this group (49%) cite they do not know what actions to take.

As fraud and cyber breaches continue to make headlines, TransUnion has seen a surge in Canadians enrolling in credit monitoring to help mitigate financial fraud risks. The study shows that 85% of surveyed Canadians feel it is important to check their credit reports, and doing so to help manage fraud risks is a top reason, with over a third (37%) checking it at least once a month.

The complete Consumer Pulse study can be viewed here. 

*The most recent Consumer Pulse study includes a survey of 956 Canadian consumers conducted between May 4-17, 2023. 

About TransUnion (NYSE: TRU)
TransUnion is a global information and insights company that makes trust possible in the modern economy. We do this by providing a comprehensive picture of each person so they can be reliably and safely represented in the marketplace. As a result, businesses and consumers can transact with confidence and achieve great things. We call this Information for Good.®

TransUnion provides solutions that help create economic opportunity, great experiences and personal empowerment for hundreds of millions of people in more than 30 countries. Our customers in Canada comprise some of the nation’s largest banks and card issuers, and TransUnion is a major credit reporting, fraud, and analytics solutions provider across the finance, retail, telecommunications, utilities, government and insurance sectors.

Hyunjoo Kim
Director, Corporate Affairs and Communications