How much of the reduced spending during the pandemic was by choice or by necessity is still up in the air, new report says
While Canadians recently reported having more cash in hand at the end of the second quarter than they did in March, the share of insolvent households also reached its highest level since 2017, according to a recent survey by MNP LTD.
The latest edition of the MNP Consumer Debt Index reported that households’ leftover money on a monthly basis increased by $106 from Q1 2021 to Q2 2021, reaching $731 as of the end of June.
However, the proportion of Canadians who are insolvent was at 30% in Q2 2021. More than half of Canadians (51%) also admitted that they are more concerned about their ability to repay their debts than they used to be.
And while 65% said that their spending levels went down during the pandemic year, MNP expressed doubts that this was by choice.
“Even those who didn’t lose a job due to COVID may have made cautionary adjustments to their household budgets or changed their spending habits,” MNP said.
For 32% of Canadians, these concerns won’t hinder their plans to spend more on dining, travel, and entertainment once the economy fully reopens.
“A significant proportion of Canadians appear to be ready to emerge from their bubbles and go straight into shopping malls, restaurants, and airplanes to celebrate the pandemic wind down,” said Grant Bazian, president of MNP LTD.
Still, the potential hazards down the line cannot be ignored.
“For many, the financial damage will likely linger for years even as they regain employment and try to cope with new debts they may have accumulated,” Bazian warned.
This will be particularly problematic for younger generations, who are likely to shoulder much of the burden of the pandemic’s fiscal impacts.
“The housing market has gone nowhere but up over the course of the pandemic,” David Macdonald of the Canadian Centre for Policy Alternatives told the Toronto Star. “Low interest rates, in part to drive economic growth, have led to massive increases in house costs, which prices youth out of the market.”