Recent economic volatility has pushed down the pace of spending growth into a nearly flat trajectory, according to new report
Latest spending data on debit card and credit cards suggest that Canadians are reducing their expenses, according to a TD Economics report.
While seasonally adjusted card spending went up by 8.2% monthly in July, it came immediately after a steep 7.3% drop in June and a “near-zero” pace of spending over the spring months, TD said.
The July recovery was likely spurred by the federal government’s grocery rebates being paid out early in the month.
“Thanks to this fiscal largess, spending may remain resilient for another month yet, but we expect that over the medium term, the trend will shift into a lower trajectory,” TD said.
“Given the volatility in recent months, we smooth the series over a period of three months, revealing a flat trend with the three-month average pace of growth at only 0.1% in July.”
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
Canadians now more guarded when it comes to discretionary spending
TD noted that spending on discretionary items is falling out of favour among Canadians.
“In goods, three-month-average growth in spending on home-related items (furniture, home electronics etc.) has remained in contractionary territory for the past five months,” TD said. “This weakness aligns with what we’ve seen in retail sales data, which we only have through June.”
While an upturn in housing market activity like that seen in early 2023 is typically followed by stronger activity involving home-related purchases such as furniture, “the turnaround in home sales earlier in the spring has yet to produce the same spending boost,” TD added.
“These categories may have more downside potential as home sales are expected to remain under pressure for the rest of the year.”
A recent poll by TransUnion found that most Canadians have been forced to dial down their miscellaneous spending due to the far-reaching impact of inflation levels and interest rates.
TransUnion reported that Canadians have made the most cuts on their discretionary spending (54%), access to digital services (21%), and subscriptions or memberships (26%). Despite these money-saving steps, more than half (55%) of respondents admitted that their incomes are still failing to keep up with inflation.
