Canadians are still spending, RBC economists note

RBC economists Abbey Xu and Rachel Battaglia said in an Oct. 16 report that Canadian cardholder spending remained strong in September, showing resilience after a brief summer slowdown.

While the pace cooled from second-quarter highs, household consumption continues to support modest economic growth amid weakness in industrial output.

“RBC cardholder spending regained momentum in September after a softer August,” they wrote. “Core retail sales, which exclude autos and gas, rose 0.7% on a three-month rolling average basis, up from 0.2% in August.”

The economists said that although the late-quarter rebound prevented a deeper pullback, overall third-quarter spending was weaker than Q2’s robust performance, reflecting a broader moderation across categories.

“The slowdown in August prevented Q3 from matching Q2’s strength,” they said. “Dining, grocery, and clothing spending all grew at roughly half the pace seen earlier in the year, though travel and entertainment provided partial offsets.”

RBC said Q3 per-capita spending trends showed a similar deceleration, suggesting the moderation is not being masked by population growth.

“Canada’s population growth slowed nearly to zero on a seasonally adjusted, annualized basis in Q3,” the report noted. “With that demographic tailwind disappearing, individual spending trends will have greater influence on GDP.”

Per-capita spending growth eased to 1.5% in Q3 from 2.5% in Q2, mirroring the aggregate decline from 2.4% to 1.3%.

Despite the slowdown, consumer demand remained resilient across both discretionary and essential purchases. RBC said September spending strength was broad-based, with discretionary services maintaining the lead on a three-month rolling basis, even as dining out softened.

“All three major spending categories, discretionary services, goods, and essentials, continued to expand, albeit at a slower pace,” the economists said.

Confidence has also begun to stabilize.

“The Conference Board of Canada’s Index of Consumer Confidence rose 4.8% in September from the end of Q2,” Xu and Battaglia said. “While sentiment remains fragile, it’s on firmer footing than earlier in the year, even as household spending continues to outpace confidence levels.”

Regionally, Ontario outperformed the rest of the country, posting cardholder spending growth of 2.4% in Q3 versus 1.9% in Q2, well above the national average. Quebec’s spending rose just 0.6%, while Prince Edward Island (4.4%) and Nova Scotia (3.4%) outpaced the national average, driven by rebounds in travel and entertainment linked to summer music festivals. Saskatchewan was the lone province to record a quarterly decline, with spending down 0.6% after strong gains in Q2.

“Overall, Canadian consumers remain resilient, though the pace of spending has clearly moderated from earlier in the year,” the economists said. “That moderation is consistent with our base-case forecast for slower household consumption growth through the remainder of 2025.”

-30-