Canadians under 35 and lower-income households were still falling behind rising costs in 2025 despite inflation returning closer to normal levels, according to new Bank of Canada research.The bank's The budget pressures faced by different households since 2020 found that while income gains for the average Canadian household kept pace with additional spending between 2020 and 2025, the experience differed significantly by age and income.“A large number of Canadians continue to view their budgets as stretched even though inflation has slowed since the pandemic,” wrote bank researcher Yaz Terajima. “These concerns are valid and reflect an important reality.”Blacklock's Reporter said lower inflation means prices are increasing more slowly but does not reverse the increases Canadians have already faced since the pandemic, the report said.The average household was about $274 ahead in 2025 compared with pre-pandemic income and spending trends. Canadians under 35, however, faced an average shortfall of $4,249, equivalent to about 4% of household income.Households in the lowest three income quintiles also recorded shortfalls. Those in the second-lowest quintile were hardest hit, with additional spending exceeding additional income by $6,805, or about 7% of household income.By comparison, households in the highest income quintile were ahead by $14,006, or 13% of income. Households aged 35 and older also generally saw income gains offset additional spending.The bank said younger and lower-income Canadians typically spend a greater share of their budgets on food and shelter, where prices remained well above pre-pandemic trends in 2025.“These differences may help explain why many Canadians still feel affordability pressures even after inflation has slowed,” said the report..The findings come after Prime Minister Mark Carney repeatedly pointed to wage growth outpacing inflation as evidence Canadians were gaining ground.“Wages in this country are growing at more than twice the rate of inflation,” Carney told the House of Commons on April 15. “That means Canadians are getting ahead.”Later in the same sitting, Carney said Canadians would “notice that rents have gone down relative to incomes for 33 straight months.”The bank's analysis cautioned that national averages can obscure significant differences among Canadians.Over the entire 2020-to-2025 period, the average household recorded about $7,400 in additional annual disposable income compared with its pre-pandemic trend while spending about $6,500 more, leaving an average annual difference of approximately $900.The bank cautioned its calculation is not a measure of overall financial well-being because it does not account for factors such as changes in housing or financial wealth.“This analysis highlights the value of looking beyond averages when assessing economic conditions,” the report said.The bank also noted the research represents the views of its author and may differ from those of the Bank of Canada's Governing Council.
