Managing Director & Partner
Two years into the pandemic, Canadians are resuming some everyday activities, but new financial concerns show up in how they continue to economize.
Over the past two years, the COVID-19 pandemic upended life for individuals across Canada, affecting everything from ways of work to how we socialize and spend. Over the past few months, as restrictions lessened and the economy strengthened, it started to look like we had almost reached the end of this unpredictable period. Despite these positive changes, given the recent market and geopolitical turbulence, Canadian consumers remain wary.
As one could expect given vaccinations and re-openings, many Canadians have begun cautiously resuming regular activities such as in-person shopping and dining out. However, more than half continue to believe that the worst has yet to pass. When paired with the war in Ukraine and rising inflation, it is not surprising that consumers continue to feel financially insecure, which affects their spending. The pessimism guiding Canadian behaviour differs from attitudes in the US, where consumers feel more confident about their personal financial security and are optimistic that the pandemic is receding.
These insights come from our most recent COVID-19 consumer sentiment survey, conducted in March. We surveyed approximately 3,000 consumers across Canada, gathering insights into their sentiments toward the pandemic, and how their habits and behaviours have evolved over time as a result.
Here are some highlights from the survey:
Although around half of Canadian consumers agree that the worst of the pandemic is over, just over one in five believe that the worst is yet to come. These beliefs are quite similar to those held by US consumers. However, a larger portion of US consumers (62%) are more inclined to resume everyday activities. By contrast, only slightly over half of Canadian consumers feel comfortable returning to old habits. As such, it would appear that Canadians are more cautiously optimistic than their southern neighbours, though are slowly, yet surely looking forward to a return to pre-pandemic behaviours.
As Canada’s recovery continues to lag, leaders can look towards the US to better understand what our future attitudes towards consumption, lifestyle, and employment may be.
With mask mandates easing and people resuming more regular activities, 2022 was expected to witness more spending on services rather than products. However, to date, spending on services such as recreation and travel has not returned to pre-pandemic levels. Large majorities of people have gone back to routine activities such as shopping (80%) or dining in a local restaurant (81%). However, Canadians continue to be hesitant to venture outside of their own locale, particularly when it comes to domestic or international travel, or participating in large gatherings.
It would appear that the reversal in spending from products back to services has not yet entirely materialized, as Canadian consumers continue to act with caution when it comes to choosing the activities in which they engage.
Canadian household net worth grew throughout the pandemic, due largely to generous government stimulus packages, and fewer opportunities to spend.
Despite this, and regardless of financial status, a significant portion of Canadian consumers feel financially insecure: 38% of people with household incomes under $50,000, and 21% of those with household incomes over $50,000 feel less financially secure now than they did before the pandemic.
Aside from concerns about inflation, the drivers behind these worries are tied to the transitory, volatility, and uncertain nature of the times. Specifically, consumers feel less financially secure because of reduced income and ongoing tensions stemming from the Ukraine war. On the other hand, financial-related concerns about COVID-19 have decreased so significantly that they no longer register among the most frequently cited reasons people feel financially insecure.
Canadians’ financial concerns, including concerns about inflation, are showing up in their purchasing decisions, with 85% of consumers changing their shopping behaviours as a result of price increases. Many have chosen to spend less or purchase fewer discretionary goods and services. Predictably, they have maintained consumption patterns for essentials such as gas and fuel, and housing.
For company leaders, it’s a reminder to identify changes in customer behaviours. Whether Canadian consumers are choosing to trade down, purchase more efficiently, or purchase less, companies can take different actions as a result.
Canadians perceive inflation to be higher than it is, and that perception directly affects their financial and spending behaviours. In our survey, we asked consumers where they noticed price increases in 11 spending categories, and how high they thought prices had increased. All told, respondents grossly overestimated increases in all but one group, gas and fuel.
Business leaders should be wary of consumers overestimating retail prices, especially in such an uncertain environment where they are already pre-disposed to throttle back on spending.
As COVID-19 accelerated, we saw the emergence of several significant Canadian consumer trends: growth of e-commerce, support for climate action, and flight from urban centres.
During the pandemic, 20% of Canadian consumers made their first online purchase, with e-commerce spending across a wide range of product categories. Although robust e-commerce growth initially sprang from health and safety concerns, approximately 37% of consumers cite convenience or new habits as the drivers behind increased online shopping.
Canadians have also become more vocal supporters of climate action, led by younger generations. Consumers are more willing than ever to pay a premium for product if it benefits climate change.
One pandemic-era trend that has reversed course is the flight from urban centres. As Canadians adopt hybrid work schedules, children return to school in person, and people take part in more in-person activities, more are moving back to urban areas. More than a third (36%) of the consumers we surveyed expect to relocate to an urban centre, with another 16% expecting to relocate to a city-based suburb.
As we return to pre-COVID-19 ways of life, business leaders must look at pandemic-era trends and assess how the latest behaviours are affecting their enterprises.
Canadians are eager to return to old norms and habits, but continue to worry about their financial stability, and whether the pandemic is truly over. By looking to the US, leaders can gather insights into what the future may hold for a post-pandemic Canada. Consumers see geopolitical tensions and inflation as major reasons for concern about the national economy, creating a widely felt pessimism, only partially offset by warmer weather and the fast-approaching summer holidays.
As people increasingly show a willingness to move on from a time when COVID-19 constrained everyday life, leaders need to de-average behaviours and the evolution of pandemic-era trends.