Trade Tensions Cast a Shadow Over Consumers
Index of Consumer Spending
In February, the Index of Consumer Spending (ICS) scored 98.6 points—a drop of 3.1 points from January (April 2022 = 100).
- The ICS dropped in seven of the 10 provinces. The largest decline was recorded in Saskatchewan (11.4 points), followed by Manitoba (8.3 points), and Alberta (6.5 points). By contrast, the index rose in each of the three territories.
- Unlike years past, the ICS declined between January and February. Consumers are navigating high levels of economic uncertainty amid the rapidly shifting trade relationship between Canada and the U.S. Job growth stalled in February, with many businesses indicating intentions to scale back hiring. Further muted job growth will be a drag on consumer spending growth in the coming months.
- Although February’s tariffs were quickly postponed, they did not go unnoticed, weighing heavily on consumer confidence, as indicated by our Index of Consumer Confidence. Sentiment about future job prospects deteriorated, with the share of survey respondents expecting to see fewer job opportunities in the future rising by 9.0 percentage points. Similarly, the share of respondents who viewed their current financial situation as worse than the previous month increased by 2.7 percentage points.
- The upending of trade relations with the U.S. are weighing heavily on consumer confidence, overshadowing the signs of economic improvement. Inflation is within the Bank of Canada’s target range, interest rates are falling, and the labour market has emerged relatively unscathed. Yet, with this fragile recovery now at risk from the developing trade war, Canadians are bracing for impact. Worsening sentiment tends to manifest in consumers allocating a greater portion of their income to savings as a precaution against troublesome times ahead.
- A notable snowstorm impacted parts of Central and Eastern Canada in February. The storm stifled some spending as businesses were forced to close. Statistics Canada estimates that the storm impacted over four times the number of employees compared to the average number of employees who lost work due to weather-related events in February over the past five years.
- The federal government’s GST/HST break also contributed to lower spending in February, lowering prices of a variety of goods and services for half the month. The end of the tax break will likely have the opposite effect on the ICS for March.
The upending of trade relations with the U.S. are weighing heavily on consumer confidence, overshadowing the signs of economic improvement.
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The Index of Consumer Spending 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. Our index tracks incremental changes in net transaction volume month-over-month from a set starting point (April 2022 = 100), enabling us to gauge economic activity levels across the country and provide insights into how the Canadian economy is performing coast to coast.
Updates on this index will be released monthly.
The Index of Consumer Spending’s (ICS) methodology has been revised for releases from January 2024 onwards. The ICS no longer tracks the weekly year-on-year changes in consumer spending. Instead, the ICS now tracks the incremental changes in net transaction volume month-over-month, from a set starting point (April 2022 = 100).
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.