Consumer spending got off to a slow start this year, following a strong end to 2024. Products benefiting from the GST holiday, which runs until Feb. 15, were among those down in January relative to the previous month.
“Retail (goods) sector sales excluding autos pulled back in January both before and after adjusting for inflation,” according to an investor note written by Carrie Freestone, an economist at RBC. “Canadians spent significantly less on clothing and electronics last month, and even grocery baskets were a little lighter.”
Canadians delivered “weak growth” in discretionary service spending during the month, according to Freestone. But we booked fewer hotel stays and restaurant tables. The three-month moving average for dinner reservations among RBC credit card holders fell 1.2% in January. That figure is seasonally adjusted.
“One key bright spot in the data was home-related spending on furniture and household electronics, along with building materials,” Freestone wrote. “We tend to see home-related spending coincide with a lift in housing market activity.” She noted reports of stronger resale activity in the Toronto and Montreal markets.
RBC is forecasting lower real per capita retail spending for January. “Per capita consumer spending trended higher in Q3 and Q4,” Freestone wrote, “but slowed alongside total consumption in January.”
The outlook for the remainder of the first quarter is clouded by trade policy question marks. RBC expects weak consumer spending on goods, bolstered somewhat by continued demand for services.
“Softer spending (in areas like autos) in January indicates that consumers are not front-loading goods purchases just yet in the face of widespread uncertainty,” Freestone wrote. “We are still assuming softer growth in Q1 with stronger consumer momentum … to pick up in the back half of the year.”