Canadian consumers pare back spending – RBC

Carrie Freestone, an economist from the Royal Bank of Canada (RBC) notes that consumer spending in Canada is starting to decline heading into the late year as inflation continues to bite.

RBC notes that category increases in consumer spending patterns are largely due to price increases in those categories rather than unit increases in Canadian consumption spending.

A Fall Moderation

September spending data suggests Canadians have begun to tighten their belts. Both nominal retail sales and inflation-adjusted retail spending (excluding auto sales) outright declined.

To-date, (nominal) September spending is trending positive in a few categories, including gasoline consumption, motor vehicle sales, and grocery spending, reflective of higher prices for essential goods.

Canadians are spending nearly 10% more on essential items than they were just one year ago. At the same time, the surge in discretionary spending has dissipated. 

As the sun sets on the summer 2023 spending spree, Canadians have started to pare back. Consumer momentum has dissipated (as expected) as high rates hit home.