While the Bank of Canada’s latest growth forecasts remain positive for the year ahead, Canadians aren’t taking any chances.

In fact, over a third of Canadians are preparing for a possible recession by bulking up their savings, according to new data from TransUnion. Those in the younger cohorts—Gen Z and Millennials—are even more likely to be bracing for recession, at 50% and 39%, respectively.

Other measures consumers are taking include paying down their debt faster (17%) and cutting back on savings for retirement (15%). Another 13% say they are increasing their usage of available credit.

TransUnion’s latest Consumer Pulse survey found that 36% of Canadians believe we are currently in a recession, while just 27% believe the Bank of Canada’s current outlook that the country won’t enter a recession before the end of the year.

“While there is a mixed level of confidence in Canadians’ financial outlook, macroeconomic pressures remain top-of-mind for many,” said Matt Fabian, director of financial services research and consulting at TransUnion Canada.

“Concerns around inflation, rising interest rates, housing affordability, and the perceived threat of a potential recession are affecting how Canadians are managing their household finances,” he added.

Financial stress is growing

However, whether or not the country enters a technical recession doesn’t make the sharp rise in interest rates and other cost of living increases any easier for consumers to digest.

The rise in interest rates means mortgage interest costs are now up by over 70% in the past year, according to data from Statistics Canada.

A minority of respondents (42%) said they are optimistic about the financial outlook over the next 12 months, with nearly a third of all Canadians anticipating difficulty paying their bills and loans in full. Of those, 22% said they plan to borrow from a family member or friend to help cover those costs.

Inflation remains a top concern

The survey identified inflation as the top financial concern (47%) facing Canadians, followed by rising home prices (14%) and the possibility of a recession (11%).

More than half (55%) of those surveyed said their incomes aren’t keeping up with rising prices. That’s despite a quarter of them having received a wage increase while another 34% anticipate one.

“While steady or increasing income levels may help mitigate the effects of inflation and increased debt levels, concerns over cost-of-living and interest rate increases continue to impact spending behaviours for many consumers,” the TransUnion survey noted.

More than half (54%) said they have cut back on discretionary spending, over a quarter (26%) have cancelled subscriptions or memberships and 21% have cancelled or reduced digital services.

The results come on the heels of yet another Bank of Canada rate hike, which will further increase debt servicing costs for those with a variable-rate mortgage or a personal or home equity line of credit (HELOC).

The Bank also revealed that it expects inflation to remain elevated at around 3% for the next year before finally reaching its target of 2% by the middle of 2025.