What the "me-cession" means for you — and how to ride it out
Brooke Thio, Content Specialist
Inflation has slowed, Canada has narrowly avoided a recession, and interest rates are finally easing. So why does the economy still seem so bleak for Canadians?
Alberta Central chief economist Charles St-Arnaud, in a recent mid-year report, coins it as a "me-cession": despite Canada’s overall economic growth, individuals remain stressed about their economic situation and are behaving as if we’re in a recession. The numbers, especially our low per-capita GDP, give a clearer picture of what’s going on.
Also read: Bank of Canada cuts target interest rate by 0.25% in July 2024 announcement
Canada’s per-capita GDP has been on the decline
The gross domestic product (GDP) per capita takes the total economic output of a country and divides it by its population. This gives us a general measure of prosperity and living standards for residents of the country. A high GDP per capita usually suggests that people have a good quality of life in terms of healthcare, education, and overall well-being.
While Canada’s GDP has been growing in 2024, per-capita GDP remained stagnant after a continuous decline over the past year. One key reason for this? The spike in Canada’s population.
Economists suggest that rapid population growth has been masking the decrease in individual spending power. Canada’s population grew by 3.2% in 2023—the highest since 1957—and this helped maintain the demand for goods and services. You might be cutting down on things like eating out or postponing big-ticket purchases, but because there are more people around to make up for your reduced spending, businesses aren’t getting hit as badly.
Furthermore, if you’re a homeowner who’s recently renewed your mortgage, you’re more likely to be feeling the pinch. According to the Bank of Canada, roughly half of outstanding mortgages have so far been renewed in the current, higher rate environment.
How to survive the “me-cession”
The good news about the ‘me-cession’ is that with careful planning, you can retain control and end up in a more financially secure position. Take this opportunity to strengthen your finances by doing the following:
Review your savings and spending
Take a good look at where your money is going each month. If you have an emergency fund and an investment portfolio, you’re already in a good position to weather any storms that might come your way. Evaluate the risks and potential returns of your investments: for instance, consider securing a GIC while interest rates are still high.
Spending-wise, consider where you can reduce non-essential expenditures like food delivery, streaming services, and manicures.
Seek out income opportunities
The best way to improve your finances, regardless of the economy, is to increase your income. This could mean looking for a more stable job, getting trained in new skills, and networking with others in your field. If you’re considering a career switch into a different industry, take a serious look at whether it’s worth the potential student loan debt or temporary reduction in income.
Pay down your debt
If you’re relying on credit to make ends meet, it’s best to seek help with a debt consolidation professional - ideally a licensed credit counsellor from your bank or credit union. You can ask about using a personal loan to reduce interest rates on your debt and create a debt management plan that will help you stay on track with your finances, even as you spend on essentials.
The bottom line
Whether it’s a recession or a "me-cession", you’ll be able to ride it out as long as you continue to practise sound financial habits. If needed, get advice from a certified financial planner for greater peace of mind.
With the BoC’s easing cycle underway and more interest rate cuts expected, Canadians should feel some of the pressure lifting at the end of 2024.