RBC Consumer Spending Tracker

• September spending data suggests Canadians have begun to tighten their belts. Both nominal retail sales and inflation-adjusted retail spending (excluding auto sales) outright declined.
• 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.
• Canadians are spending nearly 10% more on essential items than they were just one year ago. At the same time, the surge in discretionary spending has dissipated.
• Restaurant spending fell for two consecutive months, as higher debt servicing costs means squeezed Canadians are eating at home more often.
• Spending on travel pulled back in both August and September as foot traffic at airports plateaus after an early summer travel boom.
• As the sun sets on the summer 2023 spending spree, Canadians have started to pare back. Consumer momentum has dissipated (as expected) as high rates hit home.

• After posting an outright decline in Q2, retail sales growth (excluding autos) has been relatively flat in the first two months of Q3, according to our own tracking.
• Real spending on groceries and gas was lower in August than in July. But there was an uptick in spending on clothing as back-to-school shopping ramped up and for many, return-to-office.
• A softening in restaurant spending in Q2 is continuing into Q3. Nominal restaurant spending fell in August as Canadian restaurants seated fewer diners.
• Canadians are spending less on hotels and restaurants in Q3 than Q2, signaling that Canadians are beginning to tighten their (travel) belts.
• The consumer momentum witnessed earlier in the year has calmed down. We expect activity to moderate further in the months ahead as the impact of higher interest rates ripples through with a lag and labour markets show signs of softening.

• Canadian spending showed signs of slowing in July. While retail sales excluding autos continued to rise, the pace was slower than in June.
• Spending on discretionary services slipped a bit in July. The early summer travel boom is losing momentum with both real and nominal spending slightly below March peak levels.
• Though restaurant spending has increased, this largely reflects higher prices rather than additional restaurant visits.
• Spending remains firm, but early signs of softening are consistent with a drift higher in the unemployment rate. As we progress into the second half of the year, real consumption is expected to retreat as household debt servicing ratios climb to record highs.

• • Canadian consumer spending on discretionary services tracking higher so far in Q2, supported by strong travel spending. Though the rate of increase is strong, it is still running about half the pace of growth over April and May compared to Q1.
  • Purchases of discretionary goods also increased over April and May though they were still running below levels observed late last year. Sales from retailers (ex autos) have been little changed so far in Q2—declining in March but lifting in April and May, according to both early Statistics Canada reports and our own tracking.
  • Spending at bars and restaurants is little changed in Q2, but our own tracking is edging marginally higher over April and May (seasonally adjusted).
  • Travel spending continues to run strong in Q2—consistent with rising reported airport passenger traffic. Prices for travel remain high, but as of April, airfares were below year-ago levels for the first time since summer 2021.
  • Consumer spending still looks resilient even as higher debt payments and inflation cut into household purchasing power. Still, the pace of spending appears likely to slow from the 5.7% (annualized) surge in Q1. We continue to expect rising household debt servicing ratios. And consumer delinquency rates are flagging softer spending to follow over the second half of this year.

• Canadian consumer spending on discretionary services tracking higher so far in Q2, supported by strong travel spending. Though the rate of increase is strong, it is still running about half the pace of growth over April and May compared to Q1.
• Purchases of discretionary goods also increased over April and May though they were still running below levels observed late last year. Sales from retailers have been little changed so far in Q2—declining in March but lifting in April and May, according to both early Statistics Canada reports our own tracking.
• Spending at bars and restaurants is little changed in Q2, but our own tracking is edging marginally higher over April and May (seasonally adjusted).
• Travel spending continues to run strong in Q2—consistent with rising reported airport passenger traffic. Prices for travel remain high, but as of April, airfares were below year-ago levels for the first time since summer 2021.
• Consumer spending still looks resilient even as higher debt payments and inflation cut into household purchasing power. Still, the pace of spending appears likely to slow from the 5.7% (annualized) surge in Q1. We continue to expect rising household debt servicing ratios. And consumer delinquency rates are flagging softer spending to follow over the second half of this year.

• Discretionary goods spending edged lower through Q1. Our own data aligns with Statistics Canada’s seasonally adjusted retail sales figures, which showed declines in February and March.
• But discretionary services spending is still trending higher on a month-over-month basis.
• This is still a pent-up demand story—and service-sector activity will likely soften as higher interest rates cut further into household purchasing power with a lag.
• Travel spending has also persisted, with Canadians continuing to shrug off a 15% year-over-year jump in traveller accommodation prices.
• However, real (excluding price impacts) restaurant spending softened in recent months and was flat by our count in March.

• Overall spending remains steady as consumers continue to purchase non-essential services.
• Canadians continue to indulge in holidays despite higher flight prices and hotel costs.
• But they continue to cut back on restaurant spending. Meantime, the number of grocery transactions are flat.
• And some signs of weakness in goods spending have emerged, mirroring a pullback in auto sales.

• Canadian discretionary spending held up through February, even as higher interest rates and rising grocery inflation sapped spending power.
• There were some signs of restaurant spending edging lower (excluding inflation). But consumers continue to favour dining out.
• Canadians are making fewer grocery purchases on average, but transaction values are holding steady as food prices continue to rise.
• Air transportation costs rose 28% from pre-pandemic levels but Canadians are still prioritizing travel. Spending growth on trips abroad continues to outpace domestic travel.

• Spending is holding up into February, despite the Bank of Canada’s 425 basis points of hikes.
• The average daily number of restaurant transactions trended slightly higher in January as Canadians ate out in bigger numbers. Grocery purchases fell.
• And Canadians are still booking trips, as travel spending held flat alongside airport traffic.
• The Bank of Canada didn’t stand in the way of Valentine’s jewellery purchases either, which were tracking year-ago levels.
• Higher debt servicing costs and lower real wages have yet to induce a pullback in discretionary spending—though we still expect these factors to eat into household purchasing power.

• Cardholder spending held steady at the start of 2023, with spending on services outpacing spending on goods.
• Cardholders continued to spend on non-essentials, though sales at restaurants have been edging lower in recent months.
• Travel spending remains firm after the holidays.
• We continue to expect consumer purchasing power to flag following 425 basis points of hikes to the Bank of Canada’s overnight rate.

• Total cardholder spending held steady in December, but year-over-year growth in Q4 (+8.9%) was the weakest since the recovery began in early 2021.
• Holiday spending was largely in line with year-ago levels (+1.5%), implying weaker real spending in the face of higher prices.
• The moderation in accommodation spending was interrupted by holiday travel, with traveler spending rebounding briefly at the end of December.
• But real restaurant spending pulled back in the fourth quarter—an early sign that higher interest rates and decades-high inflation are weighing on consumer discretionary spending.
• With prices trending higher, growth in Canadian purchase volumes (the number of transactions) weakened drastically in December across both essential and discretionary purchases.

• Black Friday marked a strong start to the holiday shopping season in Canada as sales surged higher. Spending on electronics is running below prior holiday shopping periods, but spending on apparel, gifts, books, music, and entertainment is strong.
• So far, holiday jewellery spending is 6% below 2021 levels, but previous trends suggest a boost in purchases from last minute shoppers may yet arrive.
• Early signs suggest a moderation in accommodation spending is continuing though restaurant spending is still running strong.
• Spending is expected to soften in 2023 as interest rate hikes and inflation cut further into household purchasing power.

* Holiday goods spending categories have been revised from the previous iteration and include purchases classified by granular sub-categories within the following NOMI categories: Books, Journals, Music, & Photography, Record Shops, Apparel, Shoes, & Accessories, Clothing, Department Stores, Electronics. Gift, Hobby, Toy, & Game Shops, Jewellery, Shoes, and Specialty Retail.

• Canadian cardholder spending plateaued in recent months—but nevertheless remains above year-ago levels as we head into the crucial holiday shopping period.
• Data over the next few weeks will provide a critical indicator of just how much inflation and higher interest rates have eaten into Canadians’ purchasing plans.
• Nearly 20% of holiday shopping purchases are typically made over the next week, coinciding with U.S. Black Friday and Cyber Monday promotions that have increasingly spilled over the border to Canada.
• We expect spending to remain strong through the holiday period—but continue to look for a slowdown in early 2023 as higher interest rates and inflation cut into household purchasing power.

The early bird catches the deals

There are two peak holiday shopping periods. The first takes place around U.S. Black Friday and Cyber Monday promotions. The second comes in the weeks leading up to December 24th. After Black Friday, December 23rd is the second-busiest shopping day of the year.

• In pre-pandemic years, the first peak shopping period (late November) accounted for over 40% of total holiday shopping volumes. Late shoppers accounted for a slightly smaller share of total purchases.
• The highest volumes of electronic goods purchases were typically reported on Black Friday and Boxing Day. And the biggest day for jewellery sales was December 24th (jewellery sales are already ticking up this year.)

Hate crowds? Shop in early December

• The first weekend in December is typically one of the quieter holiday shopping weeks. At this point, the early birds have secured their Cyber Monday deals and the last-minute shoppers still have a few weeks before panic buying ensues.
• And don’t wait to buy your turkey! Grocery shopping volumes are highest in the two days leading up to December 25th.

Or shop from home

• During the pandemic, roughly half of holiday gift purchases were made online. That compares to just 25% in 2018.

Home for the holidays?

• More Canadians are packing their bags this year following pandemic disruptions in both 2020 and 2021. Travel spending is tracking much stronger ahead of the holiday period.

*Holiday goods spending includes purchases classified by the following NOMI categories: Art & Galleries, Books, Journals, Music, & Photography, Music, Record Shops, Apparel, Shoes, & Accessories, Clothing, Computer Software, Department Stores, Electronics. Gift, Hobby, Toy, & Game Shops, Jewelry, Shoes, Specialty Retail, Data Services.

• Any growth in spending is now largely a function of price growth rather than bolstered consumer demand.
• Real grocery spending is only slightly above pre-pandemic levels, while nominal spending is up 20% due to decades-high inflation. Indeed, prices of food at grocery stores were up 11.4% in September.
• Average nominal spending on gas is trending slightly higher, as prices rebound from September lows. Real spending is holding steady.
• Home-related spending continues to plateau as the housing market correction unfolds. Consumers put renovations and home improvements on pause.
• Travel spending continues to flatten out after the summer boom and hotel accommodation is levelling off.

• Card spending on discretionary goods and services continues to plateau following a spring surge.
• Restaurant spending is holding up well despite persistent inflationary pressures.
• But hotel spending (and broader traveller accommodation) is moderating from a summer spending boom.
• And total travel spending is leveling off alongside airport traffic into September and October.
• Both real and nominal gas spending moved higher at the beginning of October alongside prices that jumped 11.6% month-over-month. Real spending on gas is now above pre-pandemic levels for the first time this year.

• Hurricane Fiona weighed heavily on cardholder spending in Atlantic Canada at the end of September.
• However, overall cardholder spending held steady at 30% above pre-pandemic levels.
• Travel spending is cooling off as the summer travel season comes to a close.
• Nominal spending on gas fell (-6.7% in September) alongside gas prices (down 8%).
• Canadians completed more grocery and restaurant transactions in September, though total restaurant spending held flat.

• Cardholder spending remains 30% above pre-pandemic levels in September, with persistent strength in the restaurant and travel sector.
• Home-related spending remains above pre-pandemic levels, but is trending lower as the housing market cools.
• Purchases of essentials and discretionary items levelled off into the fall with discretionary spending settling below post-lockdown highs.
• Restaurant spending continues to flat-line though it remains well above pre-pandemic levels.
• Average spending per transaction at gas stations is falling alongside prices.

• Total cardholder spending continued to level off through August—though it remains 30% above pre-pandemic levels.
• Travel spending flattened into late summer, hovering above pre-pandemic levels as airport traffic continues to recover.
• Real spending on traveller accommodation trended lower; with higher nominal spending stemming entirely from elevated prices.
• Average gasoline transaction values are now down 11% from their peak due to lower prices.
• The number of transactions at grocery stores declined into August, while the volume of restaurant purchases held steady.

• Though it remains 30% above pre-pandemic levels, total cardholder spending continued to level off into August.
• Restaurant spending (excluding price changes) have edged lower as inflation takes a bite out of consumer purchasing power.
• The post lockdown travel booking frenzy has also plateaued as spending on hotels flattens out and the price of accommodation rises.
• Canadians are still filling up their tanks despite fuel price fluctuations. Real spending on gasoline has held steady.

• Total cardholder spending remained 30% above pre-pandemic levels in July but has edged lower so far in August.
• Average spending (per visit) at gasoline stations dipped on lower prices – total spending on gasoline still below pre-pandemic levels controlling for price increases.
• Total restaurant sales flattened in July, with the number of transactions down 3.5% this past month.
• Canadians are making more grocery store purchases. Compared to 2019, grocery transaction volumes trended higher in July (now 9.5% higher than 2019).
• But our cardholder data has yet to show that Canadians facing soaring inflation are spending a greater share of their income on essentials. In fact, consistent with pre-pandemic levels, roughly one-third of total cardholder spending can be accounted for by spending on groceries, utilities, and communications.

• Cardholder spending still running ~30% above pre-pandemic levels, but easing modestly in July
• Both goods and services spending growth levelled off into July
• Average transaction values at the pump have fallen 3.5% alongside a 9% drop in gasoline prices.
• Both real (excluding price changes) and nominal restaurant spending has plateaued with higher prices accounting for roughly one-third of the increase in restaurant spending from pre-pandemic levels
• Pent up travel demand persists as airports struggle with labour shortages

• Total spending was flat in June, holding steady at 30% above pre-shock levels.
• Canadians continue to spend more at the pump — on average $60 in June per transaction, up from $57 in May. All of this increase is due to rising prices.
• Inflation is also responsible for one third of the growth in restaurant spending.
• But Canadians continue to dine out more frequently—spending 30% above pre-pandemic levels—as growth in grocery store spending slows.
• A surge in travel and hospitality purchases has yet to subside, even as goods spending flattens out.

• Canadians are still buying more than they did before the pandemic—but early data suggests spending is plateauing.
• After a steady climb, total cardholder spending remains 30% above pre-pandemic levels in June—the fourth consecutive month at this level.
• Canadians continue to make more purchases at restaurants, despite higher prices.
• But the recent surge in domestic travel spending shows signs of moderating.

• Total card spending surged 32% above 2019 (pre-pandemic) levels in May.
• Spending on goods has plateaued at high levels but demand for travel and hospitality services continues to soar.
• Rising purchases at restaurants are not just a result of higher prices. The number of transactions is increasing too.
• Spending on international travel rose 36% from pre-pandemic levels this month.
• Average spending at the pump continued to trend higher through May.

• Total card spending continues to run roughly 30% above 2019 (pre-pandemic) levels.
• Advance bookings for travel are surging.
• For the first time since the pandemic, spending on travel and hospitality is overtaking purchases of merchandise.
• Average spending at the pump keeps climbing with surging gas prices.
• Even as some pandemic habits fade, Canadians continue to buy more groceries online.

• Card transactions held firm at 30% above pre-COVID (2019) levels in April—with strong momentum carrying into May.
• High contact services spending is closing the gap with already strong goods purchases as shoppers opt for more visits to restaurants and hotels.
• Little evidence exists to suggest higher inflation is undermining spending momentum on essential items like groceries.
• But higher gas prices are exacting a hefty toll at the pump, particularly as Canadians travel more, and show a greater interest in cross-border travel.

• Canadian household spending remains elevated in April, climbing 30% above pre-COVID levels.
• Goods sales remained strong, driven by increases in clothing, furniture and grocery purchases.
• On the services side, spending on travel and hospitality continues to surge back as the economic impact of the pandemic subsides.
• Higher food prices have yet to curb consumer appetites for dining out. Both the number of transactions and amount spent on restaurants is up.

• Aggregate spending is powering into spring, holding ~ 30% above pre-shock (2019) levels—and more than 10 percentage points above January when Omicron restrictions weighed on activity.
• A global increase in oil prices pushed up the average sales amount at gas stations, but the broader lift in spending is not just a result of inflation. The number of transactions has also increased.
• Higher prices have pushed up ‘non-discretionary’ costs (food, shelter, gasoline, etc.), but discretionary travel and hospitality spending continues to strengthen.
• Travel spending surged back above pre-pandemic levels as more families invested in March Break holidays.

• Travel spending touched pre-COVID levels for the first time as pandemic restrictions eased.
• The domestic tourism recovery continues to outpace international travel but Canadian spending on restaurants and hotels abroad has also been rising.
• Spending on services overall continued to recover alongside another increase in purchases of physical merchandise.
• Surging prices and geopolitical uncertainty from the Russian invasion of Ukraine are headwinds for the economy. But firmer job markets, easing COVID-19 restrictions, and pent-up demand for travel/hospitality services are supporting strong near-term spending.

• • Overall household spending quickly shook off the impact of the new COVID-19 variant and is now nearing pre-Omicron peak growth rates.
  • Travel spending rebounded after plunging in December and January.
  • Shopping at retail outlets built on late January momentum, and is tracking a gain in February.
  • The reopening of indoor dining rooms in Quebec and Ontario (in time for Valentine’s Day) allowed a rapid bounce back in restaurant sales.
  • The post-Omicron spending surge aligns with views that the macroeconomic impact of Omicron will be smaller and shorter-lived than previous waves, leaving the Bank of Canada free to begin hiking interest rates on March 2.