How long can Canadian consumers keep spending?

RBC economist Abbey Xu notes that Canadian consumers kept spending in September, though momentum eased as gasoline prices rose.

In RBC’s latest Consumer Spending Tracker, Xu said RBC Canadian cardholder spending continued to grow in September, but three-month average growth softened.

RBC’s estimate of core retail sales, excluding gasoline and autos, rose 0.4% on a three-month average, down from 0.6% in August.

Xu said the data remain consistent with gradual growth in Canadian household demand.

Expected improvements in household incomes and the labour market should provide support, though elevated energy costs continue to weigh on purchasing power,” Xu says.

Trade uncertainty remains a downside risk, particularly for households in directly affected industries and regions,” the economist says.

She noted that Discretionary services remained the strongest major category, rising 1.0% on a three-month average, down from 1.5% in August.

Education, entertainment and travel-related spending all contributed to growth,” Xu pointed out. Entertainment and arts spending increased 1.4%, travel rose 1.0% and dining grew 0.3%.

Also from the report, essentials spending increased 0.6%, with gasoline accounting for about one-third of the gain. Excluding gasoline, essentials spending also continued to grow, supported by groceries and utilities.

Gasoline spending rose 2.6% in September, alongside a roughly 7.9% seasonally adjusted increase in gasoline prices. Xu said higher spending at the pump should be viewed in the context of sharply higher fuel costs.

Discretionary goods spending edged down 0.1% on a three-month average despite a 1.4% increase in September.

Clothing, shoes and related apparel were a bright spot, rising 1.0% on a three-month average, while household and construction-related spending increased 0.3%.

Spending rose across all provinces on a three-month average.

Prince Edward Island and Newfoundland and Labrador posted the strongest gains, followed by New Brunswick. Ontario recorded the smallest increase, while Manitoba, Nova Scotia, Saskatchewan and Alberta exceeded the national pace.

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