Canadians are less optimistic about the outlook for the national economy and their personal financial situation in 2011 than they were last year, according to the January 2011 RBC Canadian Consumer Outlook Index (RBC CCO). Less than half (43 per cent) of Canadians feel the economy will improve over the next year, a marked decline from the 56 per cent reported in last January's RBC CCO. In addition, only 38 per cent of Canadians now feel their personal financial situation will improve over the next 12 months, compared to 45 per cent a year ago.
The prevailing mood was reflected in the tight rein many Canadians kept on their expenses over the past holiday season, with 67 per cent responding that they managed not to overspend their holiday budgets. Of this majority, 28 per cent reported they had kept track of their spending by making a budget and sticking to it; 26 per cent stated they knew how much they had to spend and "once the money was gone, that was it". By far, the largest number of respondents (46 per cent) said that they stayed within their budget because they didn't want to go into debt or increase their debt load.
"We know that managing debt is top of mind for Canadians. Having a budget in place that you can stick to is one of the best ways to keep your finances in balance and take care of any debts," said Ashif Ratanshi, head, Branch Investments, Deposits and Direct Investing, RBC. "This also gives you a good base from which to do your financial planning for the year. Ideally you want to ensure you are saving money for your future as well as covering your expenses today. Good financial advice can help you do both."
Despite the cautious economic outlook expressed by the majority of Canadian respondents, there are indications that Canada's economy will continue to grow in 2011 and 2012.
"While the pace of the recovery will remain moderate, we are projecting growth of 3.2 per cent this year and 3.1 per cent in 2012, representing the fastest pace of growth over the past four years," noted Craig Wright, senior vice-president and chief economist, RBC. "As the economy continues to expand, we expect interest rates to drift moderately higher through the coming year. This should limit pressure on household balance sheets in an environment of continued employment gains."