Holiday cheers or tears?

Cost of living trends in Southern Alberta

As we continue our climb out of the pandemic, Southern Alberta residents have been anxious for a return to “normal”. For some, that may mean making up for lost time through travel and leisure, enjoying services where access was restricted these past few years, or simply spending more quality time with friends and family.

For those fortunate enough to continue working during the pandemic, the restrictions imposed during the pandemic may have meant they saved money like never before. This has resulted in a surge in demand for everything from restaurant meals to vacations.

The pandemic was also one of many contributors to supply chain disruptions for goods and services. Demand for goods and services has been so high that supply has struggled to keep up, pushing prices upwards at a rate we haven’t seen in some 40 years. We’re seeing this inflation in almost every category, including for basic needs such as groceries, fuel, and utilities.

Economically, our government has few tools available to combat these price increases. The area of focus for 2022 has been on interest rate increases by the Bank of Canada, which in turn are passed on to consumers by banks via changes in the prime lending rate (the rate available to the bank’s best borrowers). As of December 7, 2022, that rate has increased by 4 percent this year alone.

Our MNP LTD Debt Index reflects changes in the responses of Albertans and other Canadians over time through polls conducted each quarter by Ipsos Reid. In the most recent survey, 92 percent of Albertans agree that with interest rates rising, they’ll need to be more careful about their spending, while 63 percent say they’re already beginning to feel the effects of interest rate increases.

Furthermore, a recent CBC News poll found that 84 percent of Albertans demand that the government do more to ease the bite that inflation is having on their lives. At the same time, that poll found more than half of respondents to opine that their financial situation has worsened this year.

CTV news recently reported the inflation rate in Alberta to be 6.2 percent in September 2022 (up 0.2 percent from August). This is certainly being felt in the services we consume every day. The Lethbridge Chamber of Commerce has reported that Lethbridge and area businesses have experienced sharp increases in their costs — many of which they can’t pass on to consumers. When combined with staffing shortages in many sectors, average wages have been pushed up over 5 percent year over year in Southern Alberta. As indicated by Economic Development Lethbridge in past reports, this has created a job seekers’ market in Southern Alberta in specific industries. On a related note, the Alberta Living Wage Network (“ALWN”) recently announced the “living wage” value for Lethbridge to be $20.30 per hour for 2022 (as compared to $19.00 per hour in 2021). Comparatively, this number is $17.50 for Medicine Hat and $32.75 for Canmore (which is the highest in Alberta). To paraphrase the ALWN, these numbers are intended to reflect “more than basic needs of food, clothing and shelter, but to also account for unexpected costs and things like small investments in education, childcare and being a part of the community”.

Given that the minimum wage in Alberta is $15.00 per hour, this would suggest a significant disconnect. The local Chamber has suggested in past that many Lethbridge businesses have limited ability to pay the “living wage”, due to inflationary pressures in other areas.

The Federal Government recently announced targeted relief for the most vulnerable to combat the effects of high inflation and interest rate increases. However, Statistics Canada has reported that households up to and including the lower end of the middle class are still being forced to make tough decisions about what bills to pay, skipping meals and how much they can drive their car, just to enable them to pay their mortgage or rent.

Not surprisingly, a recent survey by Equifax Canada concluded that 41 percent of respondents plan on spending less this holiday season due to higher debt levels (up from 36 percent last year).

As retailers are being forced to pass along cost increases, CTV news also reports that consumers plan to cherry pick items and reduce their overall spending this holiday season.

What can I do?

In this current environment, it has never been more important to review your spending and build a budget. Start with your basic needs, your debt servicing costs, and then add your wants from there.

In particular, remember to build into your budget infrequent expenses that you anticipate within the next year and those that you can expect to increase due to interest rate and/or inflation hikes (e.g. if you are needing to renew your mortgage at higher rates in the months ahead or your insurance will be due). When compared to your household income, you may find you have some tough choices to make to balance your budget.

If you’ve made all the household expense adjustments you can and your income is unable to keep pace, seek professional advice as early as possible. A Licenced Insolvency Trustee (LIT) is the only debt professional equipped to discuss all your debt relief and budgeting options, whether they be formal or informal. Together, we can help find sustainable solutions for you and your family.