The resumption of lockdowns in response to rising Covid-19 infections is negatively impacting consumer spending, according to a new report from TD Economics.
TD said its latest aggregated data on weekly spending indicate that Canadian consumers are pulling back amid tighter public health restrictions.
For the last week of December, spending was down 5.5% year over year, it said.
“This was the weakest showing since June, when the economy was emerging from spring lockdowns,” it said.
“Even after stripping away the three hardest-hit categories of travel, transportation, and recreation and entertainment, nationwide spending growth dropped to its lowest point since May,” the report said.
TD noted that most regions recorded weaker spending but that “the slump was most significant in provinces with the tightest restrictions.”
With restrictions ramping up even further since then, TD expects the weakness in consumer spending will intensify in the short term.
As a result, it said the Canadian economy is “now poised to suffer a modest contraction in the first quarter of the year.”