MNP: Vulnerable sectors showing steadily declining purchasing power

Nearly half of all respondents in a new survey were just $200 or less away from insolvency

MNP: Vulnerable sectors showing steadily declining purchasing power

With Canada well on its third quarter of economic disruption, the segments that suffered the greatest hits to their purchasing power were lower-income earners, young Canadians, women, and renters, according to the latest edition of the MNP Consumer Debt Index.

Now in its fourteenth wave, the MNP Consumer Debt Index is conducted quarterly by global market research firm Ipsos for MNP and tracks Canadians’ attitudes about their debt situation and their ability to meet their monthly payment obligations. The latest data was compiled between September 1 to 3 from a sample of 2,001 Canadians aged 18 years and over.

“Over the course of the pandemic, Canadians have been encouraged to believe that ‘we are all in this together,’ but it has become clear that some groups are better equipped to weather the storm better than others,” said Grant Bazian, president of MNP LTD. “This is an important distinction that may not be apparent on the surface but becomes very obvious in our research.”

The next generation of prospective home buyers have been the most financially affected by the COVID-19 outbreak, MNP said. As much as 69% of Gen-Z-ers surveyed were just $200 or less away from insolvency, including 39% who were already past the brink.

Meanwhile, 67% of respondents from households with annual incomes of less than $40,000 said that they were $200 or less away from insolvency. Additionally, nearly half of Canadian women (49%) surveyed also said they were veering closer to insolvency, with 25% saying they were already there.

Nearly six in 10 (57%) of renters surveyed reported being close to insolvency, including 32% who already were. Only 31% said that they will be able to cover their living expenses for the next year.

To compare, 36% of homeowners surveyed were $200 or less away from the threshold, with 18% already insolvent. They were also more confident in their long-term prospects, with 45% saying that they can pay for their expenses for the next 12 months.

Overall, 47% of Canadians surveyed were nearly insolvent, while 26% already were.

“Unemployment and income inequality are intensifying the debt challenges that were already present before the pandemic,” Bazian said. “The income loss as a direct result of the pandemic limits more Canadians from being able to pay off existing debts and thus puts them in severe financial distress.”