Finances, economic outlook worrying Canadians

The January 2011 RBC Canadian Consumer Outlook (RBC CCO) Index reveals Canadians are less optimistic than they were last year about the national economy and their personal financial situation.

Only 43% see the economy improving over the next year, down from 56% last year. Thirty-eight percent of Canadians expect their personal financial situation to improve over the next 12 months, compared to 45% a year ago.

These results were reflected in the disciplined approach a strong majority of Canadians took to holiday spending: 67% said they managed not to overspend. Of this group, 28% said they kept the reins on holiday spending by setting a budget and sticking to it; 26% stated they knew how much they had to spend, and “once the money was gone, that was it.” The greatest proportion -46% – said they kept within the limits of their budgets because they didn’t want to incur debt or increase existing debt loads.

“We know that managing debt is top of mind for Canadians. Having a budget in place that you can stick to is one of the best ways to keep your finances in balance and take care of any debts,” said Ashif Ratanshi, head, Branch Investments, Deposits and Direct Investing, RBC. “This also gives you a good base from which to do your financial planning for the year. Ideally you want to ensure you are saving money for your future as well as covering your expenses today. Good financial advice can help you do both.”

On jobs, there is less anxiety than a year ago: 20% said they – or someone in their household – are worried about losing their job or being laid off, a 6% drop from last year.

While most respondents were cautious about Canada’s economic outlook, the economy is expected to continue growing in 2011 and 2012.

“While the pace of the recovery will remain moderate, we are projecting growth of 3.2% this year and 3.1% in 2012, representing the fastest pace of growth over the past four years,” noted Craig Wright, senior vice-president and chief economist, RBC. “As the economy continues to expand, we expect interest rates to drift moderately higher through the coming year. This should limit pressure on household balance sheets in an environment of continued employment gains.”

The survey data shows considerable regional variation in most categories. Compared to the national average of 43%, far more Albertans – 61% – expect the economy to improve over the next year, while Quebecers dipped below the national figure, with only 32% expecting improvement.

Similarly, 48% of Albertans expect their personal financial situation to improve over the next year, beating the national average by 10%. Residents of Quebec and Ontario showed the least optimism, coming in at 35% and 36%, respectively.

Ontario shows the most anxiety over job loss, rising 3% over the national average of 20%. The Prairies showed the lowest level of anxiety at 15%.

Staff

The staff of Advisor.ca have been covering news for financial advisors since 1998.