Delta disrupts budding recovery in services spending

  • Overall spending stayed afloat in September but the spread of the Delta variant has paused a rotation in consumer spending from goods to services.
  • The initial shift to services spending kicked off when provincial economies re-opened over the summer—with food services sales spiking 11% in July as retail sales fell, according to Statscan.
  • Though services held onto earlier gains in September, there are now early signs of a slowdown in the hospitality sector and travel spending remains very soft.
  • We expect the virus to keep a lid on the recovery in high-contact services spending in the near term.





 

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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 jewellers, 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.

  • The recovery in spending plateaued in August after growing at a hot pace through the summer. Still, overall spending remained well-above pre-COVID levels.
  • Spending at restaurants and hotels eased somewhat, after jumping 16.5% above pre-shock (2019) levels in August.
  • Rising Delta infections appear to be disrupting holiday plans, causing spending on travel to slide lower again.
  • Canadians continue to shift their spending toward services and away from hard goods. Retail sales (of merchandise) are tracking down in August, even after controlling for ‘normal’ seasonal movements.
  • The extent to which rising infections will derail the recovery in spending remains uncertain. But for now, spending on the hardest-hit hospitality sectors appears to have held up through August.





 

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  • Consumer spending held up in early August following big gains in June and July.
  • Purchases of retail merchandise easing slightly in August as spending rotates back towards high-contact services.
  • Spending on restaurants and accommodation continued to rise albeit at a slower pace than the rapid rebound earlier in the summer.
  • Canadian travel spending is still higher than in the spring, but remains well below pre-shock levels.
  • Domestic tourism continues to support the recovery; central Canada lagging other regions.




 

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  • Overall spending started on a strong note in August, cementing gains made over the last few months.
  • Hospitality spending showed no sign of slowing as restaurant traffic hit a post-pandemic high.
  • For the first time this year, hospitality spending edged back above pre-COVID (2019) levels in Ontario, after trailing other larger provinces that eased restrictions earlier.
  • Travel spending held steady at 40% below pre-COVID (2019) levels after jumping in recent months.
  • Rising virus case counts suggest the pandemic is far from over. Nevertheless, vaccine distribution has gone relatively well in Canada so far, likely limiting the need for strict/extensive future containment measures.




 

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July 29, 2021

  • Canadian household spending remained well-above pre-shock 2019 levels in July building on June’s gains.
  • Spending continues to rotate to the hard-hit hospitality and travel sectors, although spending on physical merchandise also edged higher.
  • Spending on dining and lodging jumped from 29% below pre-shock (2019) levels June to 1.5% above in July.
  • RBC data shows retail sales (excluding services) increased by 2% to date in July on a seasonally adjusted basis – reversing much of the remaining softness seen in over the third virus wave.
  • Western provinces are leading the recovery in travel spending; central Canada lagging.
  • Against an increasingly more optimistic backdrop, Canadians are finding more ways to socialize outside their homes with recreational goods and clothing sales drifting higher.





See the archived COVID Consumer Spending Tracker here.

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.