Canadian Households Continue to Feel Budget Pressures Despite Slowing Inflation

The Canadian household budget has been under pressure since the pandemic began in 2020. While inflation has slowed, many households continue to feel its effects.

According to data from the Bank of Canada, younger and lower-income households have generally seen their spending outpace income gains between 2020 and 2025. However, older and higher-income households fared better, with income gains keeping up with increased spending.

A key factor in understanding household budget pressures is the 'income-spending gap', which measures the difference between additional income earned relative to pre-pandemic trends and additional spending. In 2025, this gap was negative for younger households and those in the bottom three disposable-income quintiles, indicating a budgetary shortfall.

Households that own their home faced a shortfall, while renters came close to breaking even. On the other hand, households aged 35 and older and those in the top two disposable-income quintiles experienced gains in disposable income that more than offset extra spending.