Posthaste: Tightening our belts is becoming a Canadian way of life
Canada’s economy might have fared better than expected in the past year, but Canadians aren’t feeling it in their daily lives.
Multiple consumer studies out this week suggest that Canadians’ optimism about their finances and the economy has faded even further as they struggle with the cost of living and fears of recession.
Inflation topped the concerns of more than 80 per cent of the Canadians surveyed by credit rating company TransUnion at the end of 2025, and 53 per cent feel their household income is not keeping up with rising prices.
Over 70 per cent expect the cost of living to get worse this year, according to another survey for insolvency firm MNP Ltd.
“This pessimism extends well beyond prices, reflecting a broader sense that economic conditions will deteriorate in 2026,” said the MNP study.
Most Canadians think the economy will get worse this year and anticipate rising pressure from interest rates, inflation, unemployment and Canada’s relationship with the United States, their survey showed.
“There is a widespread sense that household finances will come under increasing pressure, fuelling heightened anxiety about economic security in the year ahead,” said MNP president Grant Bazian. “Canadians expect most aspects of daily life to worsen rather than improve in 2026.”
According to the TransUnion survey, more than one in four Canadians believe the country is in a recession now, while another 32 per cent expect one in the next 12 months.
The economic uncertainty first brought on when U.S. President Donald Trump launched his tariff war last year appears to have made belt tightening a way of life in Canada.
Only 15 per cent of those in the TransUnion survey said they had not changed their spending habits. The vast majority are seeking out discounts and sales more often, shopping at cheaper retailers, buying more generic brands and using more coupons.
More than half said they were cutting back on discretionary spending like dining out, travel and entertainment.
Toronto Dominion Bank found “significant shifts” in Canadians’ financial priorities heading into the new year in its survey.
Two thirds of Canadians plan to make spending cuts, up from 51 per cent last year, and almost 60 per cent plan to trim their monthly budget by up to $1,000.
Again the primary driver was inflation and a rising cost of living, with 70 per cent of Canadians naming this as their biggest financial challenge going into 2026, up from 49 per cent last year.
Retailers are reading the writing on the wall. McDonald’s Canada announced today it will freeze the price of a small cup of coffee at $1 and drop the price of its McValue meals to $5 for at least a year.
“Canadians are facing challenges and are insecure financially. What we are doing is listening and giving them what they want,” CEO Annemarie Swijtink told The Canadian Press.
Complaints about the rising costs of fast food have spurred other outlets such as Tim Hortons , Wendy’s and Burger King to also offer deals in Canada.
Perhaps of bigger concern, though, is that belt-tightening is leading a growing number of Canadians to pull back on saving for retirement.
Almost 20 per cent in the TransUnion study said they expect to decrease their contributions to retirement funds or investments in the next three months, signalling a shift in priorities to essentials.
At the same time, 53 per cent said they were worried about setting aside enough money for retirement in the next three to five years.
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Ouch, this chart from Deloitte shows the extent to which Ontario’s manufacturing sector took the brunt of the trade war in 2025.
Tariffs hit this province the hardest because of its reliance on exports of iron, steel and autos to the United States.
Manufacturing lost thousands of jobs and the blows keep coming with Algoma Steel Group Inc. set to lay off 1,000 workers effective March 2026.
Deloitte expects Ontario to continue to struggle in the year ahead, forecasting GDP growth at 1.2 per cent, the weakest in the country.
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Today’s Posthaste was written by Pamela Heaven with additional reporting from Financial Post staff, The Canadian Press and Bloomberg.
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