27% of Canadians cutting back on necessities amid inflation: MNP

Some Canadians are scaling back spending on basic life necessities such as food, utilities and housing as the cost of living continues to surge, the latest MNP Consumer Debt Index survey has revealed.

Twenty-seven per cent of respondents said they’ve cut back on essentials, while 37 per cent said they’ve chosen to buy cheaper versions of their everyday purchases, the data showed. Nearly half (46 per cent) have cut back on non-essential items, including travelling, dining out and entertainment.

Six in ten reported they were already feeling the impact of higher interest rates – a seven-point jump in the index compared to last quarter. The survey was conducted by Ipsos on behalf of MNP LTD.

“No matter where Canadians turn, there is no recovery; housing is more expensive, driving a car is more expensive, food is more expensive,” Grant Bazian, president of MNP, a large debt consulting agency in Canada, said in a press release on Monday.

“Right now, many Canadian households are trying to adjust their budgets, cutting costs where they can in order to keep up with their monthly bills. But as the cost of living continues to rise – it’s likely to get worse before it gets better – households will have to make increasingly difficult choices about what to cut, and could find themselves piling on debt to make ends meet.”

In an attempt to get inflation under control, the Bank of Canada has been rising interest rates aggressively. The current bank rate is sitting at 1.5 per cent and market data indicates investors are betting the bank will deliver a three-quarter-point hike when the it meets on Wednesday.

“Right now, many Canadian households are trying to adjust their budgets, cutting costs where they can in order to keep up with their monthly bills,” Bazian said.

“But as the cost of living continues to rise – it’s likely to get worse before it gets better –households will have to make increasingly difficult choices about what to cut, and could find themselves piling on debt to make ends meet.”

Half of the respondents said that if rates continue to climb, they will be in financial trouble. Almost a quarter of respondents said they are not financially prepared to deal with an interest rate increase of one percentage point.

“There comes a point when even the strictest budget may not be enough to help an individual stave off financial problems.” Bazian said.

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