Consumer Spending

Consumer spending in Canada over the past several years has been influenced by the COVID-19 pandemic. Lockdowns and remote work arrangements led to a substantial shift in spending patterns. Initially, there was a decrease in spending on services like travel and entertainment, while expenditures on goods, particularly those related to home improvement and technology, increased. Government support programs, such as the Canada Emergency Response Benefit (CERB), also played a crucial role by providing income support that sustained consumer spending during periods of economic uncertainty.

As the pandemic evolved, so did the factors impacting consumer spending. The reopening of the economy and easing of restrictions led to a resurgence in spending on services. However, this shift coincided with rising inflation, driven by supply chain disruptions and increased demand. Higher prices for essential goods, such as food and gasoline, began to squeeze household budgets, leading consumers to become more price-conscious and selective in their discretionary spending. Shifts in monetary policy to combat inflation also impacted overall spending.

Looking at more recent years, consumer spending has been further shaped by rising interest rates and concerns about a potential economic slowdown. The Bank of Canada's interest rate hikes, aimed at curbing inflation, have increased borrowing costs for consumers, impacting major purchases like homes and vehicles. This environment has led to increased caution among consumers, with many prioritizing debt repayment and savings. Despite these challenges, the labor market has remained relatively strong, providing some support to consumer confidence and spending.