Canadian consumer spending not as soft as confidence yet but risks remain

By Rachel Battaglia and Abbey Xu

  • Trade disruptions sent Canadian consumer confidence to its lowest level in history in March, but retail data shows spending hasn’t softened to the same degree with RBC cardholder data reflecting a smaller pullback.
  • The Conference Board of Canada’s Index of Consumer Confidence fell 32% from January to March as the trade war with the U.S. intensified.
  • Card transactions in February showed a 0.2% (seasonally adjusted) drop in spending on retail goods excluding autos—broadly consistent with Statistics Canada’s advance estimate of retail sales falling 0.4% in February.
  • The pullback in purchases was also influenced by the end of the GST/HST tax holiday on Feb. 15, and severe weather in Ontario.
  • Spending on discretionary goods declined in February, but spending on discretionary services and essentials were little changed from January. Sales at restaurants edged higher—broadly consistent with data from OpenTable showing restaurant bookings still running 20% above year-ago levels into late March.
  • Daily (not seasonally adjusted) data showed less spending in mid-February than usual in Ontario, coinciding with severe winter weather that also weighed on home resales. Daily spending continued to broadly track last year’s patterns into mid-March.
  • Spending fell most in the Prairies and Atlantic provinces so far this year where easing population growth is weighing on overall activity. Low sensitivity to interest rates in these regions means per capita spending hasn’t seen much of a lift either from lower interest rates.
  • Ontario has shown stronger numbers so far this year, supported by the distribution of $200 stimulus cheques and the tax holiday. But, spending quickly eased mid-February after the end of the tax holiday coincided with Family Day and a severe two-day snowstorm. Most of the tax rebate cheques had already been mailed out by this point as well.
  • Consumers had less incentive to spend after the tax holiday ended. Categories covered by the tax break saw sharper declines after Feb. 15th compared to the same period in 2023 and 2024—even after controlling for the Family Day long weekend (and week-long February school breaks in Alberta and Saskatchewan).
  • Consumer spending appears to have remained relatively resilient compared to the plunge in confidence measures over February and March, but escalating international trade uncertainty, including the potential for another round of significant tariff hikes in April, could add downward pressure on spending in the months ahead.

See the archived editions of the Consumer Spending Tracker here.

By Carrie Freestone

  • January marked a sluggish start to consumer spending in 2025, but it was largely expected after spending surged at end of the 2024 holiday shopping season. Retail (goods) sector sales excluding autos pulled back in January both before and after adjusting for inflation.
  • After an impressive December, spending on goods included in the tax holiday (still in effect until Feb. 15th) were weaker. Canadians spent significantly less on clothing and electronics last month, and even grocery baskets were a little lighter.
  • Discretionary services spending has had an impressive run, but posted weak growth in January despite softness in accommodation and food services spending. Canadians have enjoyed fewer hotel stays for three consecutive months when adjusted for inflation, and dined out less frequently in the winter months. Spending on entertainment services, however, which includes amusement and recreation services, movie theatres and bowling alleys were stronger in January.
  • One key bright spot in the data was home-related spending on furniture and household electronics, along with building materials. We tend to see home-related spending coincide with a lift in housing market activity, specifically home resales. This is aligned with early reports from local real estate markets, where preliminary resales looked stronger in Toronto and Montreal. New listings also ramped up in January—a sign there’s renewed focus on selling and as a natural extension, home improvements.
  • The discrepancy between total and per capita consumption is now less pronounced as exceptionally strong population growth fades. Per capita consumer spending trended higher in Q3 and Q4, but slowed alongside total consumption in January. We are still assuming softer growth in Q1 with stronger consumer momentum (driven by demand for services) to pick up in the back half of the year. Of course, tariffs remain a major wildcard and could derail growth should they materialize to the full extent for a prolonged period of time. Softer spending (in areas like autos) in January indicates that consumers are not front-loading goods purchases just yet in the face of widespread uncertainty.

By Carrie Freestone

  • December marked a sharp reversal to November’s soft start to the holiday shopping season, when its peak typically starts and continues until Boxing Day. While Black Friday shopping was softer this year than last, total spending over the holidays was slightly above year-ago levels.
  • Canada’s federal tax holiday may have nudged spending to later in the season. There was a noticeable pullback in spending immediately after the tax holiday was announced on Nov. 21st. Spending at brick and mortar stores picked up materially after the tax holiday came into effect. However, the two weeks leading up to Christmas are typically the busiest spending days of the season.
  • But even after the tax holiday came into effect, spending on books, music, journals, photography, hobbies, toys, and games was well below year-ago levels. Instead, Canadians spent more on gifts of entertainment, art, clothing, and jewellery this year.
  • Nominal retail sales excluding autos likely ticked meaningfully higher in Q4. Our cardholder spending activity was very weak in November, but a rebound in December more than made up for the pullback with spending returning to trend. Canadians prioritized spending on clothing, shoes, furniture, electronics, gas and building materials.
  • The higher spending in December comes as population growth shows signs of slowing, leaving per-capita spending tracking a second consecutive increase in Q4. Overall, economic growth has still been soft—we are tracking a 1.5% increase in Q4 gross domestic product, up slightly from Q3’s 1% increase. Still, protectionist U.S. trade policy from the incoming Trump administration remains a risk. However, we continue to expect lower interest rates will help support stronger real per-capita consumer spending in the year ahead.

By Carrie Freestone

  • Canadian retail sales (excluding autos) looked weaker in November after consumers went on fall spending sprees in September and October. Our RBC credit cardholder data suggests Canadians pared back on discretionary goods (including home-related goods and electronics) and discretionary services (like health and fitness and home services) after a stronger month of spending in October. Restaurant sales were the outlier—holding up through November.
  • Even with November’s decline, Canada is likely on track for a slight uptick in per-person retail spending in Q4 for the first time since mid-2022.
  • Holiday spending was slightly below (-1.1%) 2023 levels over the Black Friday weekend (from the eve of Black Friday through Cyber Monday). Overall, holiday spending was 2% below a year ago in November. Canadians prioritized experience spending on entertainment, art, and movies at the expense of apparel, gifts, and jewellery.
  • Even Santa avoids taxes when he can… Spending on hobbies, toys, and games scaled back notably after Nov. 21 (down 25% from a year ago through to the end of the month) after the Federal government announced the “tax holiday”—an impending GST/HST exemption for these items from Dec. 14 to Feb. 15, 2025. Typically, spending on popular children’s gifts builds as the holiday season approaches.
  • Canadians spent 5% more on dining out in November this year nationwide. However, after seasonally adjusting data and accounting for inflation, Canadian restaurant spending was only slightly higher in the three months ending in November. Canadians who stayed at hotels spent significantly more- but this was entirely reflective of higher prices for high-profile concerts. Real accommodation spending has fallen overall in the past three months.
  • Both online and in-store spending was weaker, but online shopping posted a more pronounced decline—suggesting people who typically shop online may have been hesitant in the wake of the Canada Post strike.
  • The Bottom Line: Canadians started the holiday shopping season on a softer note with weakness across most spending categories. Still, October marked a strong start to Q4 and without further softening, Canada is on track for a slight uptick in per-person spending at the end of the year. The Bank of Canada’s holiday gift was a final 50 basis point cut to end 2024. We expect additional 25 bps cuts in the New Year will begin to appease cash-strapped consumers, but not right away.

By Carrie Freestone

  • Canadian consumer spending ticked higher in October after a two-month slump, but when adjusted for population growth, real retail sales likely fell below pre-pandemic levels in Q3, and just barely returned to February 2020 levels in October.
  • Real per capita retail sales have consistently weakened since spring 2022 when the Bank of Canada began hiking the overnight rate higher. Household purchasing power has yet to return to where it was in an ultra-low-rate environment.
  • Our RBC cardholder data showed a pickup in discretionary goods spending. Canadians spent more on home furnishings and decor for the first time in months. Still, spending on home-related goods and services remains well below 2021-2023 levels, given the backdrop of weak home resale activity in a higher interest rate environment.
  • Spending on car maintenance and repairs ramped up in October ahead of the winter months and Canadians invested in health and fitness in anticipation of the holidays. Even after adjusting for inflation, we saw a broad-based uptick in most spending categories. Canadians refreshed their wardrobes and homes with notable gains in clothing purchases and furniture sales.
  • Real hotel and restaurant spending was stronger in October, but the three-month moving averages don’t appear exceptionally strong. Both restaurant and accommodation spending were especially weak in Q3, and October spending levels are still well below the summer months.
  • October was a firmer spending month for Canadians, but one month does not make a trend. We are cautious to declare that the Canadian spending slump is over as many households are still stretched thin from higher debt servicing costs and two years of significant price growth for essential goods and services. Many Canadians will continue to renew fixed-rate mortgages at higher rates into 2025, and we expect consumer activity to remain relatively subdued into the second half of next year.

By Carrie Freestone

  • Our RBC credit cardholder data suggests Canadians are spending less, and retail sales likely declined in September before and after adjusting for inflation. Moderating inflation has meant less divergence between real and nominal spending levels.
  • The lagging impact of interest rate cuts from the Bank of Canada means many consumers will have to wait to see a rebound in their household purchasing power.
  • There was a significant pullback in buying clothing and footwear after a back-to-school shopping surge in August. Car sales were much higher in the summer months and have since moderated. But even spending on essentials (like groceries and gas) was weaker as Canadians stuck to budgets and tightened their belts. Spending on general merchandise, sporting goods, health and personal care, and building materials slightly offset weakness in other categories.
  • Q3 retail sales activity came in weakly positive based on our cardholder data as overall consumer activity chugs along at a tepid pace. Per capita retail spending remains a better measure of how households are feeling, because overall measures do not account for strong population growth. Per capita retail spending remains abysmal—sales have declined for seven of the past nine quarters with the remaining two reporting stagnant growth.
  • Q3 marks the first quarter since early 2021—when lockdowns were still imposed in many regions—that services sector spending has weakened. Canadians dined out less frequently in both August and September. Total travel spending offset a portion of the services sector pullback (thanks to spending on travel agencies and airlines), but spending at hotels was below year-ago levels for the summer.
  • Interest rates have been adjusted lower, but debt-servicing ratios are still high with households playing catch-up from previous rate hikes over the past two years. Interest rates are at high levels, and it will take some time before Canadian consumers feel a significant incentive to ramp up discretionary spending. Still, as rates move lower, we expect the persistent softening in labour markets to be closer to its end and look for consumers to start tapping credit cards more liberally in the second half of 2025.

By Carrie Freestone

  • Canadian consumer momentum showed further signs of slowing in August. Real retail sales, excluding autos, likely declined on a month-over-month basis both before and after adjusting for inflation. Home and renovation-related spending remained weak (as the housing market has yet to stage a rebound), alongside general merchandise, gasoline and health and personal care spending. Spending at clothing stores and on sporting goods trended higher ahead of the busy back-to-school season.
  • Services sector spending declined, alongside spending on goods and essentials. Still, Canadians continued to prioritize entertainment services like movie theatres and amusement parks in August over toys and other entertainment goods.
  • Households appear to be staying closer to home as travel and hospitality demand fades. Travel spending slowed with average spend per transaction falling. Spending on hotels was largely flat as restaurant spending ticked lower.
  • Overall, Canadian consumers lived a more frugal summer with many households refraining from lavish trips, instead opting to spend on domestic entertainment services. Households dined at home over restaurant patios and bought fewer consumer goods. Stretched mortgage holders continued to await lower rates, though it wouldn’t have an immediate impact. Many locked into ultra-low fixed-rate mortgages in 2024 and 2025 will still see higher debt payments at renewal even with the Bank of Canada’s interest rate cuts. Consumption will likely remain soft in the near term, relative to population growth.

By Carrie Freestone

  • Canadian consumers are pulling back this summer after years of pandemic revenge spending.
  • Retail sales likely continued to decline again in July after adjusting for inflation, implying real retail sales fell in six of the first seven months of the year. Appetite for discretionary goods remained limited, though July’s decline was broad-based. A decrease in spending on clothing, groceries and gasoline accounted for the fall.
  • Consumers are likely hosting fewer extravagant dinner parties and spending less time on patios this summer. Cardholders have spent less on groceries for three consecutive months, but real spending at restaurants was also significantly weaker in July.
  • Many are also embarking on fewer road trips so far. Real gasoline spending fell in both June and July, but spending on hotels held steady over the last three months.
  • Home-related spending was slightly higher in July after home resales picked up in June, following the first interest rate cut from the Bank of Canada in four years. However, home-related spending (on renovations and landscaping) has declined since April based on a three-month moving average. It remained 9% below pre-pandemic levels in June even though resale activity has improved since April.
  • Consumer spending continues to show signs of stress as many wait for the impact of the BoC rate cuts to filter through to mortgage interest costs. Interest rates are still high. Canadians renewing fixed-rate mortgages in 2024 still face significantly higher rates, which will cut into broader purchasing power. However, as the BoC continues its path to lower rates, mortgage holders will feel some relief and at least partially restored purchasing power upon renewal. We expect consumption will remain soft (relative to still-strong population growth) over the second half of the year before picking up in 2025 as the BoC continues to ease monetary policy.

By Carrie Freestone

  • Warm weather did not entice Canadian consumers to spend earlier in the summer. A jump in spending on discretionary goods and services in April reversed in May and June as price-sensitive consumers tightened their belts.
  • Auto sales were softer in the back half of the quarter, and are not expected to improve in the near term as software outages likely weighed on sales. Overall, retail sales were negative in the second quarter after a strong start to the year.
  • Spending on essentials (gas and groceries) was weaker in June. Spending on home goods and building materials also weighed on consumption in both May and June. Fewer Canadians renovated their homes this year, largely reflective of a sluggish housing sector as the typically hot spring housing market remained stagnant.
  • Food services spending posted weak growth on a three-month moving average basis. Hotel spending softened as higher prices staved off wanderlust. Tourism demand is still sitting below pre-pandemic levels.
  • On a per capita basis, real spending on consumer goods declined for the first time since Q3 last year, and we don’t expect a turnaround in the near term. While the Bank of Canada’s cutting cycle is underway after an initial 25 basis point cut in June, interest rates are still very restrictive as homeowners grapple with the impact of mortgage renewals. It will take time for the impact of BoC cuts to ease consumer pain.

By Carrie Freestone

RBC’s consumer spending tracking report uses RBC Data & Analytics’ proprietary database of anonymized card transactions by Canadian clients. The data are an accounting of merchant transactions that are divided into various spending categories covering tens of millions of weekly card transactions worth billions of dollars each week. Transactions, both in person and online, are classified into 11 broad spending groups: Dining, Education, Finances, Groceries, Health, Household, Shopping, Transport, Travel, Utilities, and Other. Within each group, the data are further classified: for example, shopping covers merchants classified as clothing stores, hobby shops, electronics stores, and jewelers, among others. We exclude purely financial transactions such as cash advances and insurance from spending.

We examined changes in the value of all transactions in these areas using a 7 day rolling sample starting January 1st of each year that is indexed to pre-covid levels which are calculated as the average spending for the month of February 2020. To examine the impact of seasonal factors, we also show each’s year spending profile which depicts monthly trends in spending. Online spending volumes are estimated based on the presence of an RBC card at the time of the authorization.

Protecting your privacy and safeguarding your personal information is a cornerstone of our organizational ethics and values and will always be one of our highest priorities. The underlying data for this analysis was aggregated based on transaction date, region and merchant category, and cannot be used to identify any individual client or merchant. For additional information please visit www.rbc.com/privacy.


This article is intended as general information only and is not to be relied upon as constituting legal, financial or other professional advice. A professional advisor should be consulted regarding your specific situation. Information presented is believed to be factual and up-to-date but we do not guarantee its accuracy and it should not be regarded as a complete analysis of the subjects discussed. All expressions of opinion reflect the judgment of the authors as of the date of publication and are subject to change. No endorsement of any third parties or their advice, opinions, information, products or services is expressly given or implied by Royal Bank of Canada or any of its affiliates.