A key policy shift sparked a flurry of last-minute shopping, bringing holiday spending back on track
A new report from RBC Economics reveals that Canadians significantly increased their holiday spending in December following the introduction of the federal GST/HST tax holiday. The initiative, aimed at easing financial pressures, spurred a late-season shopping surge that offset a slow start to the holiday season.
RBC economist Carrie Freestone described December as marking “a sharp reversal” after a tepid November. “While Black Friday shopping was softer this year than last, total spending over the holidays was slightly above year-ago levels,” she said in the report, released Thursday.
The federal government’s tax holiday, which runs from December 14 to February 15 of this year, eliminates GST/HST on select goods, including children’s toys, alcohol, restaurant meals, and Christmas trees. Freestone noted a noticeable dip in spending immediately after the announcement, as consumers waited to take advantage of the tax savings. However, once the holiday began, in-person spending rebounded significantly.
Spending in the two weeks leading up to Christmas—the busiest period of the season—saw a material pickup, Freestone explained. Despite this, certain categories, such as books, music, toys, and games, remained below last year’s levels. Instead, Canadians allocated more money toward gifts like entertainment experiences, art, clothing, and jewellery.
Overall cardholder spending recovered in December, compensating for the weak activity in November. Freestone reported that the late-season surge brought holiday spending back in line with historical trends.
The report also highlighted broader economic dynamics. While Canada’s population growth appears to be slowing, per-capita spending in the fourth quarter increased for the second consecutive quarter. Freestone estimated a 1.5% rise in gross domestic product (GDP) for Q4, slightly outpacing the 1% growth recorded in Q3.
Looking ahead, Freestone noted the potential impact of US protectionist trade policies under the incoming administration, but expressed optimism that lower interest rates could bolster consumer spending in 2025.
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