Grocery bills bite into Canadians’ budgets

The vast majority of Canadians (91%) say grocery bills are eating into their household budgets, finds an RBC Consumer Report.

On average, people spend $411 a month on food across the country, which leaves 43% of them having to cut other expenses.

The result? Most Canadians are now comparison-shopping, as well as following tight food budgets. This means avoiding impulse buys, with 15% trying to save by using their vehicles less.

Read: Food prices to escalate in 2013

“Since costs [and prices] can change…regularly review your budget…and make any adjustments necessary to help balance living for today and saving for future goals,” says Jason Round, head of Financial Planning Support at RBC Financial Planning.

Starting now, you should tell clients to monitor their budgets more closely. Not only have there been modest rises in food inflation over the past three years, but a recent economics report found it takes about six months for raw food commodity price changes to manifest themselves at the retail level.

Since there were major droughts in the U.S. and Canada in 2012, the report predicts food prices will now rise 3%-to-4%.

Read:

• Droughts, rising food prices predicted for 2013

• European banks pull food-commodity ETFs

People shouldn’t panic, however. “Even though we are seeing rising food costs, overall inflation should remain below 2% in 2013,” says Paul Ferley, assistant chief economist, RBC.

He adds, “We’re in an environment of modest growth, so pressures from rising food prices won’t dominate inflationary expectations.”

Read:

• Investors shouldn’t worry about inflation

• Inflation isn’t a threat…for now

It’s crucial to provide this kind of context for clients since the overall economic mood in Canada has darkened over the last quarter, with the national overall index dropping six points. This is the first time in nearly two years that there’s been an overall decrease in the index, and it reflects the fact that 60% of Canadians think the economy is in good shape.

Further, more Canadians believe the economy will worsen in the next year (30%) rather than improve (26%).