(Toronto) Canadians continue to spend on vacations and non-essential services, but are cutting back on dining out and goods, according to a new Royal Bank report.
While overall spending was flat in March, the bank’s latest spending tracking report showed signs of weakness in spending on goods, reflecting a pullback in auto sales.
Auto sales in March rose 3.7%, according to specialist firm DesRosiers Automotive Consultants, but the seasonally adjusted rate of sales was 1.59 million, which was lower than the first two months of the year. , for which this measure was approximately 1.7 million.
When adjusted for inflation, spending on restaurants fell by 0.6% on average in the first quarter of 2023, a relatively small drop, according to Carrie Freestone, an economist at the Royal.
Royal Bank’s spending tracker shows that while spending on goods is down, spending on non-essential services remains strong.
However, M.me Freestone said in an email that the bank expects to see a steeper pullback in discretionary spending once the impact of the Bank of Canada’s interest rate hikes is fully felt.
The central bank suspended rate hikes in its last decision on the matter, to let their effects ripple through the economy.
Consumer spending is one of many economic data points that has remained resilient despite persistent inflation and rising interest rates.
In the fourth quarter of 2022, despite an unchanged real gross domestic product (GDP), consumer spending increased by 0.5%.
The central bank’s next interest rate decision is scheduled for April 12.
The Royal Bank’s February report found that Canadians were making trips to the grocery store less often, but still spending about the same amount per trip.
In addition, in March, the number of grocery transactions remained essentially flat.
Food inflation has been outpacing headline inflation for quite some time. Prices for groceries rose 10.6% year over year in February, while headline inflation was 5.2%.