Spending on housing is being curtailed by intensified consumer caution amid prolonged high inflation
While there was an uptick in home sales over the past three months, Canadians' spending on housing-related purchases did not see a corresponding increase, according to TD Economics.
“Traditionally, increased housing activity led to increased spending on furniture, electronics, and building materials, but this pattern has not been observed recently, resulting in a flat contribution to overall spending,” TD said.
In the latest edition of its TD Spend analysis, Canadian consumer spending was found to have been compelled by the holiday season and reasonably warm weather.
“Spending during the last three months of the year grew on average by 0.7% month over month,” TD said. “This change in spending dynamic helped the year finish on a high note.”
RBC Economics study shows Canadian spending slowing due to debt pressures. While spending is steady, early signs of weakness coincide with a slight unemployment rate increase.https://t.co/r5amlMW8vO#mortgagenws #mortgageindustry #householddebt #economy
— Canadian Mortgage Professional Magazine (@CMPmagazine) August 11, 2023
However, TD noted that intensified consumer caution amid prolonged high inflation led to markedly reduced spending on housing-related goods.
In particular, the elevated-rate environment is tempering households’ intentions to undertake major purchases, especially durable goods typically financed through loans.
“This cautious approach, especially in sectors reliant on retail financing, highlights the complex relationship between consumer sentiment, inflation, and spending behaviours, which will continue to stamp out goods consumption growth in 2024,” TD said.
Meanwhile, Canadians’ spending on recreation and entertainment registered a significant surge in Q4 2023, with more consumers prioritizing local and accessible leisure activities.
“Spending in areas such as restaurants, concerts, and movies remained robust, reflecting a preference for experiences closer to home,” TD said. “This trend highlights a selective approach to discretionary spending, where consumers are choosing to invest in certain types of services over others.”
