Growth in Consumer Spending Diminishes
Index of Consumer Spending
The Index of Consumer Spending averaged 92.8 points in February, a decline of 4.7 points from January (the week of April 10, 2022 = 100).
- After falling to 95.0 points during the week of January 29, the Index of Consumer Spending (ICS) slightly recovered during the week of February 5 and reached 95.2 points. But this recovery was short-lived—consumer spending growth decelerated between the weeks of February 5 and February 26, falling to 89.4 points. Data on the ICS are available from the week of April 10, 2022, to the week of February 26, 2023.
- The ICS fell to a record low of 89.4 points in the final week of February. Growth in consumer spending has decelerated past all measures of consumer price index (CPI) inflation. Our index captures growth in nominal consumer spending. But if adjusted for inflation, real growth in consumer spending could potentially be negative. One reason for the decline in the ICS in February is that consumer confidence has fallen. According to our Index of Consumer Confidence (ICC), pessimism over current and future finances rose in February.
- Inflation is trending in the right direction. In January, prices grew 5.9 per cent (year over year), a decline of 0.4 percentage points from December. Still, inflation remains too high for comfort. Food prices haven’t budged, and shelter and gas prices continue to be a thorn in the side of consumers.
- Canada’s labour market performed well in January but has since lost some steam. The number of job vacancies has trended downward, and February saw minimal employment gains of around 21,900 jobs. However, the unemployment rate remains low, sitting steady at 5 per cent. Consumer spending would have been much weaker had labour markets not been tight.
Alberta
The index averaged 95.3 points in February, a decrease of 4.4 points from January.
Alberta’s index increased to 98.7 points during the week of February 5, then plummeted throughout the rest of the month. The ICS fell to a record low of 92.5 points in the week of February 26. Consumer confidence has waned in Alberta; according to our ICC, most respondents felt that February wasn’t a good time to spend on big-ticket items. Persistent inflation and higher interest rates continue to strongly affect consumers.
Atlantic Provinces
The index averaged 103.0 points in February, a drop of 5.0 points from January.
Growth in consumer spending was much weaker at the end of February than at the beginning of the month. After rising to 111.5 points during the week of January 29, the ICS declined for four weeks straight, falling to 100.2 points during the week of February 26. The region’s unemployment rate averaged lower in February (7.4 per cent) than in January (8.0 per cent), but consumer confidence still plummeted. Consumers in this region felt February wasn’t a good month to spend on major purchases, which caused decelerated growth in consumer spending.
British Columbia
The index fell to 90.7 points in February, averaging 7.0 points lower than in January.
British Columbia’s index decreased throughout February, meaning the province’s index has seen eight consecutive weeks of decline. Between the weeks of January 29 and February 26, the index plunged 6.2 points to a record low of 87.7 points. The province recorded modest job growth in February, though the unemployment rate increased to 5.1 per cent. The inflation rate fell to 6.2 per cent but remains above the national average. According to our ICC, many British Columbians believe they will be financially worse off in six months. Consumers in the province continue to be bogged down by inflation and higher interest rates.
Ontario
The index averaged 88.6 points in February, an increase of 4.1 points from January.
Ontario’s employment levels increased by 15,600 jobs in February. The province’s unemployment rate fell to 5.1 per cent, and inflation is easing. Despite these positive indicators, many Ontarians felt that February wasn’t a good month to spend big—a sentiment that was apparent in consumer spending data. The index trended downward between the weeks of February 5 and February 26, falling to a record low of 84.8 points. Ontario’s index has remained below the 100-point benchmark for 38 consecutive weeks, showing that growth in consumer spending has weakened and is yet to recover.
Quebec
The index fell to 93.5 points in February, averaging 5.0 points lower than in January.
Quebec’s index fell to 94.3 points during the week of February 5 but then rose to 95.1 points in the following week. The upward trend didn’t last long, as the index declined 5.1 points in the second half of the month to settle at 90.0 points during the week of February 26. Employment levels fell by 15,500 jobs in February, and consumer confidence edged lower. Quebec’s unemployment rate sat at 4.1 per cent in February—growth in consumer spending would have been weaker had labour markets not been so tight. An inflation rate higher than the national average and elevated interest rates in the province have slowed consumer demand.
Manitoba–Saskatchewan
The index declined 3.4 points in February to 106.4 points.
The region’s index rose to 111.0 points in the week of February 5 but sharply declined throughout the rest the month to hit 103.0 points during the week of February 26. Despite the modest increase in employment levels, the region’s unemployment rate rose slightly to 4.5 per cent. According to our ICC, pessimism over future finances increased while positive sentiment toward job prospects deteriorated in February, which explains why the ICS declined.
Territories
The index averaged 104.4 points in February, edging 2.4 points lower than in January.
After falling to 100.9 points during the week of January 29, the region’s index jumped 7.3 points, reaching 108.2 points during the week of February 12. This trend reversed in the final two weeks of February, when the index plummeted to 100.7 points. Consumers in the region are facing higher-than-average prices, especially at the gas pump. In Whitehorse and Yellowknife, gasoline prices averaged $1.69 and $1.58 per litre, respectively. In addition, the region’s unemployment rate averaged 6.3 per cent in February, an increase of 0.3 percentage points from January. Lacklustre job market performances, higher interest rates, and elevated prices have taken a toll on consumers.
Inflation and higher interest rates have made consumers less confident about their financial situations, ultimately leading to decelerated growth in consumer spending.
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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.