Savings

Canadian households see inflation eat into their savings amid pandemic

Canadians built up a reserve of savings in the early months of the pandemic that was expected to fuel spending and provide a cushion during the recovery, but despite rising wages, households are seeing their reserve of savings eroded by inflation .

Average household net savings fell 44% to $1,900 in the first quarter from a year earlier, according to Statistics Canada’s latest release of household economic accounts broken down by income and household income. ‘age. All income groups saw their net savings erode “as inflationary pressures weighed on consumption”, the agency said, noting that low-income households were hardest hit.

The good news, when it comes to spending that continues to fuel the recovery, is that the average household still has more savings than it had before COVID-19 hit and governments do not intensify income support programs. Data from Statscan shows that the average household still holds 63% more net savings than before the pandemic, even though that amount has fallen by more than two-thirds since the second quarter of 2020.

But not all households are doing the same. As Statscan notes, wealthier households have a much better ability to absorb the shock of rising prices of goods and services than poorer households.

While average net savings among the wealthiest fifth of households saw the smallest year-over-year decline, at 15%, net savings fell 95% for the second-richest income group. lower. As for the poorest fifth, the average household in this group has negative net savings – meaning they have spent more than their disposable income – and are further behind than before the pandemic.

The Decoder is a weekly feature that unveils an important economic picture.

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