Spending Continues its Downward Trend in August
Index of Consumer Spending
Data for August shows the Index of Consumer Spending (ICS) decreased to 110.4 points, an 8.2-point decrease from July (April 2022 = 100). Data for the first two weeks of September hints at a minor recovery.
- Despite August being the back-to-school shopping season, all provinces and territories apart from Nunavut saw their ICS decrease month to month in August. This drop marks three consecutive month-to-month declines in the national ICS score. However, data for the first half of September hints that this downward trend may be over.
- The Northwest Territories had low spending in August, with its ICS reaching a score of only 114.5, slightly higher than its score of 112.9 the year before. In 2023, the Northwest Territories suffered numerous wildfires, which suppressed spending in the region.
- A rise in the national unemployment rate to 6.6 per cent in August contributed to the lower spending. However, September saw stronger labour market results. Employment in the month rose by 47,000 jobs, and the unemployment rate ticking down to 6.5 per cent, boosting household spending.
- Wage growth is trending down, contributing to weaker spending overall. With the labour market still significantly cooler than earlier this year and inflation concerns fading well into the rearview, wage growth has slowed and is forecast to continue moderating, which will dampen consumer spending. Year over year, average hourly wages rose by 5.0 per cent in August (down from 5.2 per cent in July) and by 4.6 per cent in September.
- The household savings rate is forecast to gradually decline through the second half of the year and heading into 2025. As interest rates continue declining, growth in interest payments will slow, freeing up some savings for discretionary spending. However, many households will still be renewing mortgages at much higher interest rates than five years ago, limiting the potential upside of spending over the next two years.
Despite August being the back-to-school shopping season, all provinces and territories apart from Nunavut saw their ICS decrease month to month in August.
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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.