Measuring household financial stress in Canada using consumer surveys

Nicolas Bédard and Patrick Sabourin

No 2024-5, Staff Analytical Notes from Bank of Canada

Abstract: A combination of high inflation and high interest rates in recent years has put pressure on households’ budgets. To understand how households are being impacted by and coping with these challenges, we use data from the Canadian Survey of Consumer Expectations to build a subjective measure of household financial stress. We find that financial stress in 2023 was at a historical high, but financial vulnerability appears concentrated among roughly one-tenth of the population, specifically those living paycheque-to-paycheque and mortgage holders that are heavily constrained by their debt payments. Monitoring financial stress among the most vulnerable households is important because of the spillover effects on the Canadian economy from their weaker consumption plans and stronger intentions to sell their houses than other consumers. Overall, financial stress remains manageable for most households. However, this situation could deteriorate quickly, especially as some mortgage holders go through renewals in the coming months.

Keywords: Financial stability; Domestic demand and components; Recent economic and financial developments; Monetary policy transmission (search for similar items in EconPapers)
JEL-codes: D1 D14 G5 H3 (search for similar items in EconPapers)
Pages: 26 pages
Date: 2024-04
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