Business Environment Profiles - Canada
Published: 07 March 2025
Per capita disposable income
32522 $
-1.5 %
Per capita disposable income determines an individual's ability to purchase goods or services. It represents the personal income left after payment of direct taxes and various fees, such as medical insurance premiums, to the government. This is calculated from income earned from all sources (e.g. wages, government transfers and rental income) minus taxes and some non-tax payments (e.g. fines, forfeitures and donations), and dividing that by the total Canadian population. Disposable income data is sourced from Statistics Canada and is chained to 2017 dollars.
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In 2009, unemployment spiked, peaking at 9.3%. However, Canada was considerably more insulated from the recession's fallout relative to the United States. Whereas US per capita disposable income fell 1.3% in 2009, Canada's per capita income increased 3.8% over the year. This anomaly was due higher transfers from government to households that mitigated the loss from wages. As a result, the income left after taxes was higher than in 2008 as the government aimed to alleviate the country form the perils of the financial crisis.
Disposable income only slightly declined 0.6% in 2011 as unemployment remained high and wages did not grow. Disposable income grew significantly in 2015 as wages began to catch up to the economic growth and recovery the country was experiencing in previous years. However, in 2016 wages adjusted a little from the previous year's growth as the economy was hurt by declining commodity prices, particularly that of crude oil. Since then, per capita disposable income has grown at a slow and steady pace, product of stable growth of the economy and working conditions in Canada.
In 2019, disposable income growth slowed as the economy experienced turmoil from trade tensions that slowed investment and manufacturing activity as companies wait for uncertainty and tensions to ease. Despite the economic fallout of the pandemic, per capita disposable income increased in 2020 as Canada responded to the shutdowns due to the spread of COVID-19 (coronavirus). As the pandemic spread, lockdown procedures precipitated business closure and spiking unemployment. This led the Canadian government to pledge more than $100.0 billion in stimulus funds to aid economic recovery over a three-year period. As a result, per capita disposable income rose 6.9% in 2020 alone, driven by direct stimulus payments from the Canadian government to citizens. This stimulus was extended in 2021 as the delta variant spread, prolonging the cautious reopening of the Canadian economy.
The Bank of Canada began quantitative tightening in 2022 as inflation skyrocketed, aiming to be slightly more dovish than the US Federal Reserve. Reductions in government stimulus will coincide a rise in benchmark interest rates, which will be followed by tapered purchases of government bonds leading to the selling of government bonds. However, as inflation continues to climb, interest rate hikes have gotten more aggressive.
Primarily the result of inflation and high interest rates reducing consumers purchasing power, per capita disposable income was reduced by 4.0% in 2022. While a rebounding economy can be accommodative towards increasing consumers per capita disposable income, the main hindrance to larger increases continues to stem from inflation. Necessary items, such as energy, food and housing, continue to rise and will impact per capita disposable income through the current period. Though rates have since fallen after consecutive increases made by the Bank of Canada, disposable income will drop by 0.3% in 2025 because of the impact of potential US tariffs on Canadian imports and the country's retaliatory tariffs. These actions will boost the cost of goods, straining household budgets and dampening disposable incomes. While Canada does have import options, its heavy reliance on the United States for critical goods such as automobiles and pharmaceuticals presents challenges. The country faces quality concerns and complex supply chain issues when considering overseas purchases of these goods, compounded by high transportation costs for distant imports. Because of this, Canadian consumers will temporarily deal with elevated costs cutting into their budgets.
Per capita disposable income in Canada will drop over the period. The imposition of potential U.S...
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