Canadians are putting off summer vacations, new car purchases, and are becoming more strict with budgets so they can better handle higher gas and food prices and reduce their debts, according to a survey by Royal Bank.
The Canadian Consumer Outlook Index released Wednesday suggests Canadians are looking for ways to save as they grapple with gas prices that rose 29.5% in May alone and food prices that grew 4.2% that month.
“Canadians are continuing to focus on managing their debts – a very good sign as we enter the second half of the year,” Richard Goyder, vice-president, personal lending, RBC said in a statement.
“It’s encouraging to see consumers are trying to live within their means and seeking out very practical ways to not only pay their bills but also to save and invest.”
The survey was released the same day Bank of Canada governor Mark Carney warned in a speech that agricultural product prices are up substantially since interest rates last went up, and will continue to rise.
“As we tried to explain in April, our expectation was that these food prices would come into the economy over about a six-month period. That’s been the historic experience and that’s exactly what’s happening.”
“So there’s a bit more to come, given the recent rises in food. Food, unfortunately, is going to remain relatively expensive and get a little more expensive in the coming months.”
RBC said 55% of the 4,008 Canadians it polled are doing more comparison shopping for food, 48% are cutting back on impulse buys, and 30% of those surveyed report that they are more likely to delay vacation plans until 2012.
The bank also found that 31% are putting off a new vehicle purchase and making do with their current one longer than usual. Others reported that they are using their vehicles less, making fewer trips, and using public transit more.
RBC says those surveyed carry an average of $13,058 in personal debt, not including mortgages, and fewer respondents feel confident they’re managing their debts well, compared with the previous survey three months ago.
The respondents said they are focusing on reducing what they owe, spending less, and saving or investing more.
Four-in-ten Canadians surveyed said they expect their personal financial situation to improve over the next year, while a similar number are optimistic that the national economy will improve over the same time period.
Increased demand, combined with disasters in major food producing countries – floods and drought in Australia, drought in Russia and floods on the Canadian Prairies– have driven food commodities prices up 41.8% compared with last year, according to a report by Scotiabank released this spring.
The higher price for oil and gas used by trucks to deliver food adds to the price Canadians pay at the checkout.
