But higher prices and the increased spending that follows are only one side of the equation. The other side is household disposable income, which, like price levels, is above its pre-pandemic trend. The key question is whether disposable income has kept pace with greater spending.

The short answer is yes. Relative to pre-pandemic trends, disposable income growth generally exceeded growth in spending over 2020–25, producing an annual surplus about $900 on average over this period. Spending growth did outpace income gains between 2022 and 2024 as elevated inflation pushed spending higher. But by 2025, the gap had closed, with disposable income gains once again exceeding additional spending.

However, these overall results mask important differences across households. While many households saw income growth offset higher spending, others—particularly younger and lower-income households—did not. These differences may help explain why many Canadians still feel affordability pressures even after inflation has slowed.

Measuring the gap between household income and spending

To compare how different households have fared since the pandemic, I examine how household disposable income and spending have changed relative to their trends before the pandemic. These trends provide a simple benchmark for what households might have expected had the pandemic—and other unexpected developments—not occurred. Also, focusing on household spending provides a more comprehensive measure of budget pressures because it reflects both the prices households faced and what they purchased.

The spending data come from Statistics Canada’s Distributions of Household Economic Accounts and are available for different groups of households across 13 spending categories, including food, shelter, transportation and recreation.

For each household group, I first calculate the deviation of disposable income from its pre-pandemic trend. My second calculation is the amount of additional spending, which I determine by multiplying real household spending in each category by the deviation in the corresponding consumer price index from its pre-pandemic trend and totalling the results across all 13 categories.

Comparing the two measures yields what I call the income-spending gap. It shows whether the additional income earned relative to pre-pandemic trend exceeds the amount of additional spending. A negative value indicates a budgetary shortfall.

Of course, this gap will differ across households because each household allocates its spending differently across goods and services. The gap will also vary across households because, relative to pre-pandemic trends, prices and spending have evolved differently across categories, while income growth has varied across households.

Importantly, this gap is not a measure of overall financial well-being. For example, it does not reflect changes in wealth—both housing and financial—that may influence how households assess their financial situation. Nor does it reveal whether households bought less as prices rose, even if their disposable income kept pace with spending. Rather, it is a simple accounting exercise to quantify the budget pressures that different households face.

Where the average household stood by 2025

Over 2020–25, the average household spent about $6,500 more per year relative to pre-pandemic trends (Chart 2). Gains in disposable income over that period were slightly larger, at about $7,400 extra per year. As noted earlier, this amounts to about a $900 difference between disposable income and spending.