Here are Canadian consumers’ biggest concerns for 2019

Here are Canadian consumers’ biggest concerns for 2019
Canadians are most concerned about rising inflation, the loonie’s weakness and higher interest rates, according to a new poll by the Canadian Imperial Bank of Commerce.

Nearly two-thirds, or 64 per cent, of people surveyed said they were worried about rising cost of goods, while 34 per cent said they worried about the Canadian dollar, and 31 per cent fretted about rising interest rates.

According to Jamie Golombek, managing director, CIBC Financial Planning and Advice, the most surprising finding of the poll of more than 1,500 Canadians, was the number who had amassed more debt in 2018.

“Most people are looking at mortgage debt, credit card debt, loans for home improvements … they’re really trying to pay down all that debt before retirement,” said Golombek.

Of the 29 per cent of Canadians who took on more debt in the past 12 months, 34 per cent cited covering day-to-day items as their key reason, 21 per cent racked up debt to buy a new vehicle, and 20 per cent cited home repair or renovation as their biggest credit expense, according to CIBC’s survey.

But amid expectations of higher costs next year, Canadians (26 per cent) now see paying back debt as their top priority in 2019, according to the poll — the ninth consecutive year that debt repayment has topped CIBC’s annual survey of financial priorities.

Around two-thirds of Canadians also fear that the stock market has reached its peak, which is contributing to a growing desire to cut debt. The Canadian stock market is in the midst of its worst showing in a decade, losing 15 per cent in 2018 year-to-date and hitting a two-year low on Christmas Eve.

“The biggest concern is that people will panic, and they’ll say, ‘You know what, I shouldn’t save it all for retirement because the market is very choppy, very dangerous, so I need to stop investing and spend money today,’” Golomek said.

The recent tumult in the market could scare people away from investing long-term for retirement, he said, and focus on “the here and now.”

“People are focusing on the immediate priorities. If you take a long-term approach and you have a financial plan, these turns in the market don’t touch you,” Golombek said.

If you take a long-term approach and you have a financial plan, these turns in the market don’t touch you

Jamie Golombek, CIBC Financial Planning and Advice

While Canadians are also worried about imported inflation thanks to a weak loonie, analysts are divided over its direction. In November, CIBC cut its year-end forecast for the Canadian dollar against the American greenback from 1.28 to 1.31, citing weakness in crude oil markets.

BMO Capital Markets, however, believes the Canadian dollar will strengthen as the Bank of Canada continues to lift interest rates.

One U.S. dollar fetched 1.36 Canadian dollars on Thursday, Bloomberg data shows.

Increasing interest rates are another cause for concern for the indebted. The bank raised its benchmark rate 25 basis points in October to 1.75 per cent. Following this trend of hikes, analysts project this rate to rise to around 2.5 per cent next year.

The hikes will impact those who depend on line of credit the most, says Golombek. As those rates increase, the cash flow they have on a monthly basis tends to decrease, which could leave them vulnerable.

“I worry that the message isn’t getting out there – that people (don’t have)  a financial plan or a budget,” said Golomek.

Credit cards were the biggest source of debt for Canadians, while mortgage was the biggest debt expense for 28 per cent of those surveyed.

Though 28 per cent say they have no debt at all, according to the poll, only six per cent said saving for retirement is at the top of their list — which Golomek argues should be a priority.

“I think it’s important that people focus on a strategy going into 2019,” he said. “Try to get a handle on your spending so as not to go further into debt in the new year.”
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