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 beneath the load of fee hikes by the Financial institution of Canada.
Whereas larger rates of interest weighed on many households as the price of their mortgage payments rose, it additionally helped enhance funding revenue, the report mentioned.
The funding revenue of the wealthiest 20% of households grew quicker than their curiosity funds, resulting in a internet enhance in revenue over inflation and boosting their buying energy in 2023.
For different households, curiosity fee will increase on common had been larger than their funding revenue final yr.
In consequence, 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 larger within the first quarter of 2024 than within the final quarter of 2019,” the report mentioned.
“Nevertheless, since 2022, rising inflation and tighter financial coverage have eroded buying energy, notably amongst lower-income households.”
