Canadian discretionary spending ticks up: RBC
While concerns over Canada’s economic health grow because of ongoing tariff disputes with the United States and the economic fallout as a result, Canadians are still opening their wallets when it comes to discretionary spending.
That is the finding of a recent report put out by RBC economist Abbey Xu.
According to the RBC Canadian cardholder spending holds steady amid economic uncertainty report, Xu says that Canadian consumer spending built on the spending momentum seen in Aprile of this year.
According to Xu: “Our tracking shows a 0.7% increase in total retail sales in May, and spending was firmer up 1.1% excluding auto sales. Auto purchases have cooled in recent months following a surge in March, but underlying consumer demand appears to be resilient across most categories.”
This is line with what Statistics Canada fond when it released its April retail sales numbers that showed a 0.5% month-over-month increase and which Xu says tracks with what RBC is seeing. When core retail sales were looked at, minus automotive and spending on gasoline, RBC finds that figure climbed by 1.2% in May which Xu says reflects solid momentum in broader household purchases.
“Gasoline spending, while volatile in recent months, rose slightly by 0.3% in May following a sharp decline in April that coincided with the removal of the consumer carbon tax. Interestingly, excluding gasoline spending revealed slightly stronger retail sales growth overall—suggesting robust activity in other categories,” she wrote.
READ: Bank of Canada holds key rate at 2.75% as tariff uncertainty persists
While auto sales saw a surge in March, as Canadians moved to make purchases before the full impact of United States President Donald Trump’s tariffs hit, sales have since dipped. Xu says that according to RBC’s seasonally adjusted estimates based on industry reports, there was a “2.6% decline in April car sales followed by another 2.8% drop in May. Still, two consecutive declines weren’t enough to fully offset the strength seen in March, pointing to a gradual normalization in auto purchases rather than a sharp reversal.”
While Overall spending remained solid in May, Xu did write that some key categories showed signs of cooling compared to April.
“Discretionary services continued to lead with spending rising 1.2% from April. Essentials followed closely up 1.1%, while discretionary goods posted a more modest gain of 0.5%. Despite the slower momentum, all three categories remained in positive territory, pointing to continued underlying strength in household demand,” she added.
