The Legault government's financier, Finance Minister Eric Girard, may well say that Quebec is not in a recession, but the vast majority of Quebec households that are pulling the devil by the tail can't use the minister's reassuring speech.
These financially struggling households are convinced that the rise in the cost of living has literally made them poorer. And they are right. Furthermore, they are not the only ones who have lost purchasing power. As proof of this…
Of 24 typical households, 20 experienced a decrease in their disposable income (in constant dollars, i.e. after eliminating inflation) in 2023 compared to 2022, with the decrease ranging from $700 to a few thousand dollars. By typical households we mean eight household categories and three income levels (low: 25th percentile / medium: 50th percentile / high: 75th percentile). The categories are: single people, couples without children, couples with children, single parents, single seniors aged 65 to 69, senior couples aged 65 to 69, single seniors aged 70 and over, senior couples aged 70 and over. more.
To claim that 20 out of 24 households will have become poorer in 2023, I rely on the study “Evolution of Household Purchasing Power in Quebec” published last week by the Research Chair in Taxation and Personal Finance. Researchers Luc Godbout, Suzie St-Cerny and Frédérick Hallé-Rochon compared, in constant dollars, the disposable income earned annually by various typical households since 2019.
RECESSION”
According to third-quarter data collected by the Institute of Statistics, Quebec's real GDP fell for just the second quarter in a row. So technically we are in a recession. However, according to Minister Eric Girard, this is not the case.
“However, it is still too early to say that Quebec is in recession,” he says, “since the decline in economic activity is not widespread.” In fact, several sectors, in addition to employment, consumption and disposable income, are experiencing growth,” he continues, adding that he is aware that the situation remains difficult for many Quebecers.
DAILY…
Let's get the matter straight. Although we can say that inflation has fallen to “just” 3.6% over 12 months, households have a deep feeling that it is higher.
What is most destabilizing the portfolios of low- and middle-income households are the price increases that have impacted housing and food. You should know that housing makes up 27% of the consumption basket of the least well-off, and food makes up 19%.
HOUSING
Let's start with housing. In the last 12 months from November 2022 to November 2023, housing costs in Quebec generally recorded an increase of 6.8%. Specifically, rents rose by 7.4%.
The increase in homeownership over the last 12 months was 8.3%. Another increase that doesn't hurt worms is that of 11.4% in the cost of home insurance and mortgage insurance. Things are even worse when it comes to the rising cost of mortgage interest, payments for which exploded by 29.8% last year.
EAT
Now let’s move on to the other major household expense: food. Every time we go to the local grocery store, we feel that all the prices of the products have increased significantly. So much so that people are becoming more and more suspicious of dealers' offers!
According to the latest inflation data from Statistics Canada, the overall food basket has increased by 5% over the past 12 months. The products that recorded the largest increases were: fresh or frozen beef (+9.5%); butter (+8.5%); fresh fruit (+9.7%); canned vegetables (+7.5%); edible fats and oils (+9.2%); Food purchased in restaurants (+6.4%).
FOR 3 YEARS
In three years, inflation in Quebec rose by 16.5%. Housing construction increased by 19.4%. And food rose even more, by 22.3%.
Add to that the Bank of Canada's staggering 4.75 percentage point increase in the key interest rate and its catastrophic impact on mortgage loans, personal loans, business loans, credit cards and bank advances, and we no longer wonder why there are so many households in Quebec who are on the brink of financial depression.