As inflation sharply accelerated in 2022, family buying energy declined. In the meantime, the Financial institution of Canada quickly elevated its key interest rate from its pandemic-era lows, bringing it as much as 5% by mid-2023 earlier than hitting pause.
The Consumer Price Index reached an all-time excessive of 8.1% in June 2022, and has slowed ever since below the burden of fee hikes by the Financial institution of Canada.
Whereas increased rates of interest weighed on many households as the price of their mortgage payments rose, it additionally helped enhance funding earnings, the report stated.
The funding earnings of the wealthiest 20% of households grew sooner than their curiosity funds, resulting in a web enhance in earnings over inflation and boosting their buying energy in 2023.
For different households, curiosity cost will increase on common had been increased than their funding earnings final 12 months.
Because of this, households within the third and fourth quintiles noticed their buying energy stagnate, whereas the lowest-income households noticed their energy deteriorate.
“In abstract, the buying energy of most households remained increased within the first quarter of 2024 than within the final quarter of 2019,” the report stated.
“Nonetheless, since 2022, rising inflation and tighter financial coverage have eroded buying energy, notably amongst lower-income households.”
