The ICS Dips Lower in July With No Sign of Improvement in August
Index of Consumer Spending
Data for July shows the Index of Consumer Spending (ICS) decreased to 118.0 points in July, a 3.1-point decrease from June’s ICS score (April 2022 = 100). Preliminary data for the month of August hints that the ICS will decrease further.
- Apart from British Columbia and Prince Edward Island, all provinces and territories had a month-to-month decrease in their ICS scores from June to July. Preliminary data for the month of August up to August 17, 2024, has all provinces and territories declining further.
- Household primary income has increased at a modest pace throughout the first half of the year. Primary income is expected to continue growing in the second half of the year but at a much slower pace as lower productivity and a cooling labour market weigh on wage growth.
- The national unemployment rate has been trending upward through the year. Although it held steady reaching 6.4 per cent in July, the unemployment rate rose to 6.6 per cent in August. This is equivalent to about 60,000 more unemployed people. A sluggish labour market is clearly impacting consumer spending.
- The Bank of Canada’s rate cutting cycle is expected to provide relief to consumers. This could free up some room for more spending but will not be instant, as the full impacts of monetary policy typically experience around an 18-month lag.
- Through autumn, consumer spending is expected to remain restrained with weaker labour markets and upcoming mortgage renewals among some households. However, spending will pick up in 2025 with further interest rate reductions and better conditions for hiring.
- On a brighter note, August’s ICS score will likely see a boost on its current preliminary score as data from the “back-to-school” shopping weeks is accounted for.
Household primary income has increased at a modest pace throughout the first half of the year.
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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.