Growth in Consumer Spending Continues Trending Downward
Index of Consumer Spending—Edition 8
The Index of Consumer Spending averaged 92.4 points in December, a slight drop of 0.3 points from November (the week of April 10, 2022 = 100).
- Growth in consumer spending remained relatively flat throughout December. The Index of Consumer Spending (ICS) fell to 91.6 points during the week of November 27—a new all-time low—but recovered to reach 92.7 points in the week of December 11. Data on the ICS are available from the week of April 10, 2022, to the week of December 11, 2022.
- In November, the inflation rate was 6.8 per cent year-over-year. Canadians have truly felt the pinch when it comes to food and shelter costs. Inflation for both increased in November, which certainly influenced consumer spending behaviour. However, December’s slight uptick in the ICS can partially be attributed to holiday spending. Canadians did spend more throughout December 2022 compared with December 2021, but only by a small margin. Since our index represents year-over-year growth in nominal spending, our findings suggest that most of this growth is from higher prices.
- The Bank of Canada raised the overnight target rate to 4.25 per cent in December. Mortgages are more expensive, and overall demand for durable goods continues to decline. According to our Index of Consumer Confidence (ICC), positive sentiment toward major purchases fell in December.
- Canada’s labour market continues to be a bright spot in the economy. Employment levels increased by 100,000 jobs in December, while the unemployment rate fell to 5.0 per cent. Growth in consumer spending would have been much weaker had the labour market not been so tight.
- Looking to the new year, the Bank’s tightening monetary policy will continue to work its way through the economy and economic activity will cool. We expect growth in consumer spending to continue trending downward during this period of stagnant economic growth.
Alberta
The index averaged 96.4 points in December, a decline of 2.2 points from November.
Alberta’s index declined between the weeks of November 20 and November 27, falling to 95.5 points. But it recovered 1.1 points in the first two weeks of December, thanks to increased consumer confidence and healthy holiday spending. Labour markets remained tight—Alberta’s unemployment rate was unchanged at 5.8 per cent in December. Growth in consumer spending would have declined further had the labour market not performed well. Despite the slight recovery at the beginning of December, Alberta’s index remains below the values recorded between May and October. This means that growth in consumer spending has decelerated and is yet to recover fully.
Atlantic Provinces
The index averaged 102.3 points in December, an increase of 0.2 points from November.
The region’s index rose to 102.1 points in the week of November 20 before falling to 101.4 points in the following week. Consumer spending usually increases during the holidays, explaining why the index jumped 2.0 points in the first week of December. And despite a slight decline to 102.5 points in the week of December 11, the index edged higher this month compared with last month. The region’s unemployment rate averaged 7.6 per cent (a slight decline from the 7.7 per cent recorded in November). Optimism over current and future finances, as well as future job prospects, rose in December, which explains why the index inched up.
British Columbia
The index fell to 92.8 points in December, averaging 0.6 points lower than in November.
British Columbia’s index steadily declined between the weeks of November 20 and December 11 to an all-time low of 92.4 points. What’s more, British Columbia is the only region in which the index declined throughout the first two weeks of December. According to our ICC, consumer confidence edged lower in December compared with November. Inflation remains above the national average, and higher interest rates have consumers feeling hesitant toward making big-ticket purchases. This contributed to the decelerated growth in consumer spending.
Ontario
The index averaged 86.7 points in December.
Ontario’s index fell to a historical low of 85.7 points during the week of November 27. This decline was short-lived, however, as the index trended upward in the first two weeks of December, reaching 87.1 points in the week of December 11. Ultimately, the ICS averaged 86.7 points in December, the same as November. Employment levels in Ontario increased by 42,000 jobs in December, which boosted optimism over current and future finances. Essentially, the index’s recovery in the first half of December was fuelled by an increase in employment, which increased consumer confidence.
Quebec
The index rose to 92.6 points in December, averaging 1.4 points higher than in November.
Between the weeks of November 20 and November 27, Quebec’s index fell to 91.4 points. However, the index rose 1.6 points to reach 103.0 points during the week of December 11. This rise in the index can primarily be attributed to inflation. In addition, Quebec’s unemployment rate inched up to 4.0 per cent, and unemployment levels increased by 7,500. Despite this increase in unemployment, Quebecers felt more confident about current and future finances in December compared with November, explaining why there was an uptick in consumer spending growth in December.
Saskatchewan–Manitoba
The index averaged 107.6 points in December, a drop of 2.1 points from November.
The region’s index sank 4.0 points between the weeks of November 13 and November 27. However, the index trended upward to reach 97.5 points in the week of December 11. Ultimately, growth in consumer spending averaged lower in December than in November. Overall consumer confidence plummeted, which explains why the ICS edged lower. The region’s labour market remains tight, and employment levels increased by 11,000 jobs. Growth in consumer spending would have been weaker had labour markets not been tight.
Territories
The index edged lower in December, averaging 2.6 points lower than in November.
The region’s index fluctuated between the weeks of November 20 and December 11. It rose to 98.7 points in the week of November 27 but fell to 96.9 points in the week of December 4, only to jump 2.5 points in the week of December 11. Ultimately, the index trended upward but averaged lower than in November. Growth in consumer spending contracted in the Northwest Territories, while Yukon and Nunavut recorded positive (but weak) spending growth. Inflation increased across the region in November, averaging 6.8 per cent. This, along with higher interest rates, influenced consumer spending habits. However, the region’s labour market performed better in December compared with November—the unemployment rate declined in all three territories. Overall, the upward trend in the region’s index at the beginning of December can be attributed to holiday spending and improved labour market conditions.
Inflation and higher interest have changed how consumers spend their money. Economic activity will continue to cool throughout 2023.
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Canada’s Gross Domestic Product is largely made up of consumption. One way to gauge how the economy is performing is to look at how much Canadians are spending. Yet across the Canadian economic landscape, there is a lack of readily available consumer spending data. With that in mind, we created the Index of Consumer Spending for provinces and for Canada as a whole. This unique Index is powered by exclusive consumer transaction data provided by Moneris Data Services. Moneris is Canada’s number one payment processor with over 3.5 billion transactions spanning more than 325,000 merchant locations. This index is intended to inform senior policy makers how the country and the provinces are doing. Updates on this index will be released monthly.
Disclaimer: Forecasts and research often involve numerous assumptions and data sources and are subject to inherent risks and uncertainties. This information is not intended as specific investment, accounting, legal, or tax advice.
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