Canadians have started to cut down their spending amid elevated costs
The Bank of Canada’s cumulative 475-basis-point rate hikes may be working to curb consumer spending, according to a new RBC report.
September spending data pointed to moderating spending levels among Canadians, with nominal retail sales and inflation-adjusted retail spending (excluding auto sales) in particular posting outright declines, RBC said.
“As the sun sets on the summer 2023 spending spree, Canadians have started to pare back,” wrote RBC economist Carrie Freestone. “Consumer momentum has dissipated (as expected) as high rates hit home.”
At the same time, “Canadians are spending nearly 10% more on essential items than they were just one year ago,” even as “the surge in discretionary spending has dissipated,” Freestone added.
“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.”
Economists predict a soft landing for Canada's economy, avoiding a recession despite high interest rates. GDP growth expected to stall in Q3, with no rate cuts until April.https://t.co/YBb4eJDzBN#businessnews #mortgageindustry #ratehike #economy
— Canadian Mortgage Professional Magazine (@CMPmagazine) July 25, 2023
Canadians spending less on non-essentials
Amid the current environment, most Canadians are significantly cutting down on their discretionary spending (54%), digital services (21%), and subscriptions or memberships (26%), according to a poll by TransUnion earlier this year.
More than one third (34%) of respondents also said that they are buttressing their resources for a possible recession, while 36% indicated a belief that a recession is already in progress.
“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.”
