EATING INTO YOUR WALLET
Consumers hit by rising inflation
People may have to make hard choices about their spending as inflation eats into the affordability of almost everything we buy, an expert says.
“It's less about where people can find savings, it's more about looking at where do you spend the most money. How do you deal with the fact your spending power has gone down?” said Isaiah Chan, vice-president of services and programs at the Credit Counselling Society.
“It's going to be a situation where people are going to have to look at what are their essentials. Many people look at their groceries and decide, OK, maybe they don't need to purchase the name-brand products, maybe they can scale back there.
“For other people, it might mean they can't go skiing as much or taking a look at transportation and biting the bullet by getting rid of one car or taking transit more.”
Inflation surged to 3.1 per cent in Canada in June, though the consumer price index rose a more modest 2.4 per cent in B.C. Only Saskatchewan (1.8 per cent) registered a smaller increase, according to figures released by Statistics Canada.
In May, Canadian prices averaged 3.6 per cent higher than in May 2020.
The global supply chain has grappled with exceptional challenges because of the pandemic, the StatCan report said.
“Against a backdrop of input shortages, production bottlenecks, higher shipping costs and delivery delays, and the reopening of some economies, the international flow of raw materials and finished products has experienced disruptions,” the report said.
Higher inflation is something to keep in mind when making all sorts of financial decisions, Chan said. Four out of 10 people polled have said the pandemic has led them to consider switching jobs or careers in the next 12 months.
“There have been a lot of reports around the `Great Resignation,'” Chan said. “We have to be aware that, potentially, we could have a situation here where inflation gets out of control or becomes unpredictable.”
The Credit Counselling Society is a non-profit service that helps people manage debt and budgeting anonymously, through free credit counselling, low-cost solutions and education.
Nationally, shelter costs were up 4.4 per cent over June, 2020, transportation was up 5.6 per cent and gasoline was up 32 per cent, StatCan said.
That was somewhat offset by the cost of cellular service falling 21.4 per cent, thanks mainly to a variety of promotions, StatCan said.
Clothing and footwear prices barely budged, mostly due to lower prices for women's clothes, the federal statistics agency said, and consumers paid 11.1 per cent less for fresh or frozen beef and 7.5 per cent less for fresh vegetables. Chicken, on the other hand, cost 10.6 per cent more than a year ago.
It's good to have an inflation plan, Chan said.
“The million-dollar question — or maybe with inflation it's now the $2-million question — is whether the recent inflation is a blip as the world slowly begins to climb out of pandemic and supply scrambles to catch up to pent-up demand.
“Or, after about a quarter century of inflation remaining stable at around two per cent a year, is higher inflation going to stick around long term?
“It's more than a $2-million question,” Chan said. “I think it's still debatable, there are differing opinions about that and there are a multitude of factors when it comes to inflation.
“I think we'll know in the next little while here whether or not (high inflation) is here to stay or if it's just a blip. But I think everyone should be taking stock of their situation right now.”