Two years after the onset of the Great Recession, the Canadian economy is more tortoise than hare. Craig Alexander, chief economist at Toronto-based TD Bank Financial Group, forecasts modest economic growth of 2% in 2011 and 2.5% in 2012. He expects services, particularly business services, to outperform most other sectors, and that retail and wholesale trade will do decent business, too. But Alexander figures that manufacturing, transportation and construction are in for trying times. On the whole, his prognosis, like that of most economists, is for lukewarm growth over the next several years. “Things aren’t going to be terrible,” he says, “but they’re not going to be great.”
Focus on financial fixes
Canadians are swimming in debt. Household debt as a share of disposable income has climbed from 80% in the early 1990s to a record 134% today, says Pedro Antunes, director of national and provincial forecasting at the Ottawa-based Conference Board of Canada. With interest rates ultra-low, this massive debt load wouldn’t be a concern if Canadians were on a sound financial footing. But they’re not. Antunes deems the situation “very precarious” for many consumers: “As interest rates start to rise, debt-service charges will grow very quickly.”
Consumer-spending specialists point to signs that maxed-out Canadians are seeking guidance about getting their fiscal houses in order. Fully a third of the respondents to a recent Manulife Bank survey ranked being debt-free as their top financial priority, scoring it 10 out of 10.
Emphasize value for money
Today’s consumers are interested in value above all. That doesn’t just mean discount pricing, says Stephens; Canadians want great quality or a great price. A value-conscious consumer might buy an $80 T-shirt because it’s superbly made and in a timeless style, so she can justify the expense as providing many years of use. She might also buy an $8 T-shirt because she can’t resist the price and she’s out little even if it lasts only five washes. What she isn’t interested in is a $45 T-shirt. “To portray value, you have to get out of the middle,” says Stephens.
At the low end, consumers are increasingly willing to sacrifice frills for a good price, particularly for transactional purchases. Jeremy Gutsche, founder of Toronto-based TrendHunter.com, pinpoints “unservice,” such as hotels at which guests check themselves in, as a defining trend. At the same time, many customers frustrated with the erratic quality of low-cost furniture, appliances and building materials are willing to pay more for big-ticket items that will last. “It comes down to the old saying that people are too poor to buy cheap,” says John Williams, senior partner at Toronto-based retail consultancy J.C. Williams Group.
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About me: I give Economic, Social and Global trend briefings from some of the world's brightest minds at my blog http://saveriomanzo.com/ and http://saveriomanzo.blogspot.com/. I also provide true and tested financial planning and wealth advice. Most recently, over the past few years, I have become socially conscious and have been attempting to practise ways in which I can live my life more environmentally friendly. Along with some truly exceptional friends, we provide consulting and business development for small-medium sized businesses. In addition, I truly believe in being philanthropic, giving and doing unto other as we would have them do unto us. Some of my fondest resources are from Barry Ritholtz of The Big Picture, David Rosenberg and what Warren Buffett of Berkshire Hathaway is up to behind the scenes, as an example.
Saverio Manzo
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