Canadian consumers to cut spending

More Canadians are pessimistic about the country's overall economic direction, the latest Consumerology Report says.

For the first time since 2009, more Canadians are feeling pessimistic than optimistic about the economy and are limiting their discretionary spending because of high debt levels and worries about retirement security, according to the latest Consumerology Report.

The quarterly report from ad agency Bensimon Byrne, based on a survey of 1,500 people, suggests that 55% of Canadians believe the economy is in decline, compared with 45% who believe it’s growing.

“That’s a very significant development, when you see such a big sentiment shift, so marketers need to take note of that,” says Jack Bensimon, president of Bensimon Byrne.

Quebecers had the most negative outlook, while residents of the Prairie provinces and Alberta were more optimistic about the country’s economic direction. Higher-income earners were generally more optimistic, while those with household incomes under $75,000 say Canada is “headed down the wrong economic path,” the report suggests.

However, Canadians of various income levels plan to lower their spending for the third year in a row, even those who don’t necessarily have to be careful with their money, according to the report. More than a third of Canadians also say they feel less financially secure this year than they did a few years ago.

Overall, 85% of Canadians believe that their cost of living is increasing faster than their incomes, and retirement savings is the only area of discretionary spending where people plan to spend more than last year.

That’s based on the Bensimon Byrne Consumer Spending Index, which asks whether people plan to spend more or less on 32 essential and discretionary items. Taxes, gas and groceries are essential areas where people plan to increase their spending, while Canadians are planning on reducing their discretionary spending significantly.

“In an era where people have historically high debt loads and relatively stagnant incomes, and the sense is the cost of living continues to go up and economic pessimism is rising, it’s a difficult environment to project a lot of increased consumer spending,” Bensimon says.

“We’re living in a time when people are feeling very strapped, they’re carrying high loads of debt, they’re very tapped out, and except for a segment of the population in and around about 30% that you would consider upwardly mobile, the majority of Canadians – middle class if you want to call it that – are feeling very stretched right now, so marketers have to get…in line with that reality.”

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