A surge in Canadians’ disposable incomes and a decline in their spending habits have resulted in approximately $170 billion of surplus of cash, $90 billion of which is tied up in households, according to a CIBC report.
The COVID-19 pandemic was the impetus for reduced consumer spending, but with the addition of the government’s pandemic emergency programs, which bolstered incomes, the amount of money Canadians saved skyrocketed. The report noted that the excess cash—the other $80 billion is held by businesses—which is about 4% of consumer spending, is a record.
“That spike in disposable incomes coincided with a notable decline in spending, which resulted in the savings rate surging from 3.6% to 28.2% as of June,” read the report. “Since then, government support has become increasingly more tailored to those who need it the most, while the re-openings have seen a nascent recovery in consumer spending. Using US data for the third quarter as a guidepost, the Canadian savings rate likely fell to 13% in Q3—still miles above the 3.6% level seen prior to the pandemic. With the second wave of infection upon us, that rate is likely to remain elevated during the winter.”
The report’s findings are all the more bizarre considering the economy is still reeling from pandemic-induced business shutdowns this past spring, and yet Canadians have never been more flush. But upon closer examination, low-income households accounted for the overwhelming majority of job losses in Canada, and their consumption habits didn’t much diminish as they continued buying essentials. However, the majority of the surplus money belongs to mid- and high-income households, which curtailed their non-essential outlays.
“We do not have current data on spending by level of income for Canadians, but utilizing high-frequency US data, we learn that spending amongst high-income households is currently 10% below its January level—notably weaker than the 3% drop seen amongst low-income households,” said the report. “With the happy days of summer over, it is reasonable to assume that mid- and high-income households will, in fact, reduce consumption of nonessentials again.”
The report also predicted that consumption growth will decelerate while incomes will stay elevated because of both the Canada Recovery Benefit program and Employment Insurance, which will cost $17.9 billion and $13.5 billion, respectively, through the next two years, and because of new job creation.
When you flip houses, you are not usually intending to live in the house; rather the strategy is to sell the property as fast as you can so as to avoid paying taxes and other expenses on the property. While there will obviously be initial costs that you will need to budget for, house flipping can be done with few resources and little experience.
For Real Estate News and Market Updates & VIP Access to Exclusive Real Estate Investment Opportunities
If you’re a newer house flipper, you have probably heard about the 70 percent rule. Here’s your guide to the investing rule that can prevent you from spending too much money on an investment.
“Sign up for our daily newsletter to get the latest news, updates and offers delivered directly to your inbox.”
Designed to offer readers accurate, cutting-edge information to guide their investment decisions, each issue of Canadian Real Estate is filled with informative articles on a broad range of topics.
© 2021 Canadian Estate Wealth. All Rights Reserved by Merged Media