Inflation’s well in-hand. So why do so many Canadians still feel ‘a squeeze’?

News that inflation dropped to a more than three-year low in September has not changed the financial picture for many Canadians who continue to struggle with a permanently higher cost of living.
Growing optimism about the improving economic outlook for some comes as others report the need for ongoing sacrifices and a continual stress about making ends meet, according to new polling released Wednesday.
The latest MNP Consumer Debt Index, based on Ipsos polling from September, reported that nearly a third of respondents (30 per cent) are turning to “bill-splitting” behaviours — spreading out costs with others — in the current cost-of-living crunch. That could refer to carpooling, buying in bulk with a group, sharing subscriptions and living with other people.
Those who are cohabitating or splitting bills were more likely to report being close to insolvency, according to MNP.
Wes Cowan, licensed insolvency trustee with MNP, tells Global News that he’s seen a “significant increase” in the number of people reaching out for help managing their personal finances in the past six or nine months.
“For the last couple of years or so, we’ve been under greater financial stress with high inflation, higher interest rates,” Cowan says. “People are adapting. I think Canadians are resilient … but there is definitely a squeeze on our budgets.”
Overall, the Consumer Debt Index improved by four points from the previous quarter, suggesting that, in aggregate, Canadians are feeling better about their finances.
Two in every five Canadian households (42 per cent) still say they’re less than $200 away from insolvency each month, according to the polling. Those are the lowest levels seen in the quarterly survey since September 2018.
Meanwhile, nearly three in 10 (28 per cent) indicated in the MNP survey that they’re eating less overall to cut down on costs.
Reports that Canadians are eating less to save money come the same day Statistics Canada reported that food insecurity rose in 2022 as inflation peaked.
The agency said Wednesday that 15.6 per cent of households experienced some level of food insecurity in 2022 after being relatively stable from 2017 to 2021. The reading was up from 9.6 per cent in 2017 and 11.6 per cent in 2018.
Signs of stress come a day after StatCan said that annual inflation slowed sharply to 1.6 per cent in September, falling below the Bank of Canada’s target for price stability.
While lower gas prices and discounts on clothing and airfare are offering relief to Canadians, StatCan noted that the relatively modest cost of living hikes followed years of surging inflation.
Over the past three years, the consumer price index has risen 12.6 per cent. In some parts of that representative household basket — namely groceries and shelter costs — prices were up more than 20 per cent over the same period.
Shannon Terrell, spokesperson and lead writer with NerdWallet Canada, tells Global News that focusing on the monthly and annual inflation figures can sometimes miss the “bigger picture” facing Canadian pocketbooks.
“Although we’re seeing inflation in a better place now, we have to acknowledge by and large that Canadians have been struggling with these raised costs for essentials for a number of years now,” she says.
“While price growth is slowing, overall prices themselves are not decreasing. They’re simply rising at a slower pace. And so the cumulative effect of inflation, especially over the last couple of years, really cannot be understated.”
The largest fuel in the inflationary file remains rising mortgage interest costs — a direct impact from the Bank of Canada’s rapid rate-hike cycle.
The central bank has recently started unwinding its policy rate from decades-high levels, delivering three consecutive rate cuts since June. But the cost of borrowing remains elevated, Cowan notes, which is eating up a larger share of the monthly budget for Canadians who hold certain kinds of debt.
“Unless the interest rates come down more substantially over the next little while, they’re still going to have to deal with that,” he says.
Roughly three in 10 (31 per cent) now expect their debt situation to be better a year from now, the MNP survey showed, up two percentage points from last quarter. But nearly half (48 per cent) said that, even if interest rates decline, they’re worried about their ability to pay down their debt.
Both Cowan and Terrell point to wages as critical to keeping up with the new, permanently higher cost of living.
On average, hourly wages have outpaced inflation for the past 19 months, according to StatCan.
But the parliamentary budget officer said in a report released last week that not all income levels are sharing in the prosperity. Canadians have lost purchasing power in the face of higher interest rates and inflation since 2022, the fiscal watchdog said, particularly lower-income households.
“People are still playing catch-up. And so that’s taking some time,” Cowan says.
— with files from Global News’s Anne Gaviola and The Canadian Press