Measure is an important inflation factor
Canadian retail sales dipped in January, extending a trend of reduced consumer spending that began in the aftermath of the holiday season, according to the RBC Consumer Spending Tracker.
This slowdown is attributed to a decline in purchases of groceries and clothing, which overshadowed modest increases in other areas such as gasoline and furniture.
The pattern of Canadians cutting back on non-essential goods and services has been evident since the fall, with only a brief uptick in November due to holiday shopping. The report also noted a continuous drop in spending on discretionary services since September, with the exception of November. This includes a downturn in hotel spending following the summer and a decrease in restaurant spending after the holidays.
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In addition, the tracker highlighted that Canadian households are particularly reducing their spending on non-essential items, a common response to the strain of higher debt payments. This caution is reflected in the data, showing a decline in real per capita retail sales excluding autos for six consecutive quarters up to the fourth quarter of 2023.
Although the fourth quarter of 2023 saw a surprisingly strong performance in consumer spending, largely driven by a rebound in services, this trend does not appear sustainable into 2024.
The findings from December and January indicate a tightening of consumer budgets, with expectations for retail activity to remain muted in the first quarter of 2024 after a period of intense pre-holiday expenditure amid rising prices.
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