Sounding a frugal horn

Hey there, time traveller!
This article was published 28/06/2023 (1159 days ago), so information in it may no longer be current.

The latest headlines about retail sales in Canada must have the most frugal of Winnipeggers clutching their wallets.

In its latest retail outlook, Colliers reported retail spending climbed 2.4 per cent in March. While that rate is less than it was a year earlier, it still surpasses 1.6 per cent increases reported by other developed countries.

Retail sales in the United States rose only 1.6 per cent while Canada’s fellow G7 countries Germany, France and the United Kingdom, reported decreases.

The statistics and comparisons fail to properly portray the realities of a Canadian consumer’s life in 2023.

Families can cut corners as much as they can, but they have next to no control over core parts of their budgets.

Many Canadians, especially those of lesser means, are struggling with a financial double-whammy. The consumer price index (CPI), which is a benchmark measure of inflation, had risen to 9.1 per cent in June 2022, but Bank of Canada’s regimen of increasing interest rates to combat inflationary pressures has brought the CPI down to 3.4 per cent in May, Statistics Canada announced Tuesday.

A big reason for inflation is gasoline prices — a constant consumer bugaboo — which were more than 30 per cent higher than they were in February 2021, the Reuters news agency reported in March.

The cost of groceries — which have caught the attention of House of Commons committees aiming to score political points — has risen nine per cent on an annual basis, the Statistics Canada report revealed.

Shelter costs have jumped 6.6 per cent too, Reuters reported, and a big reason is higher interest costs, which Statistics Canada announced have shot up almost 30 per cent from last year.

That’s where the second-half of the double-whammy hammers the pocketbooks of Canadians. The Bank of Canada raised its overnight lending rate to 4.75 per cent on June 7, the highest level in 22 years, and one that has jumped more than three per cent in the last year in response to soaring inflation.

Canada’s retail banks and credit unions take their interest-rate cues from the Bank of Canada, which means the costs for Canadians to pay for mortgages or other loans have increased accordingly.

The cost of groceries has risen nine per cent on an annual basis, the Statistics Canada report revealed.

While the central bank’s decisions have rolled back the CPI from 9.1 per cent last June, the latest 3.4 per cent figure remains above the Bank of Canada’s two per cent inflation target.

It’s a prescription that will likely continue in the near future, if a recent speech in Victoria by Paul Beaudry, the Bank of Canada’s deputy governor, is any indication.

“We know this tightening cycle has not been easy for many Canadians,” Beaudry told the Greater Victoria Chamber of Commerce on June 8. “But the alternative — not controlling inflation — would be far worse, particularly for people living on low or fixed incomes.”

Canada has been there before, and pensioners who live on fixed incomes will remember the economic shocks of the high-inflation era of the 1980s, when interest rates shot up beyond 20 per cent.

They are economic conditions no Canadians would wish to revisit, especially as the level of national consumer debt reached $2.32 trillion for the first quarter of 2023, a new record.

It’s easy to ask for government support, a metaphorical painkiller, to address the uncomfortable side-effects of the Bank of Canada’s inflationary remedy.

What will be more difficult, and more essential for the majority of consumers, is to live a healthier financial lifestyle and grapple with the weight of their own retail spending and debt.