Impact of BoC moves has yet to significantly impact discretionary spending, RBC says
Despite the Bank of Canada’s 425-basis-point hike over the past year, the impact of this development has yet to manifest into a decline in Canadians’ discretionary spending, according to RBC Economics.
As of the end of January, the 28-day rolling average of spending among cardholding Canadians was 30.37% higher than the rate of consumer expenditure seen prior to January 2021. This was also markedly higher than the 24.6% level seen in December 2022, RBC said in its new market analysis.
And while grocery purchases fell, travel spending continued to be robust at levels 14% higher than the rates seen prior to January 2022.
“Higher debt servicing costs and lower real wages have yet to induce a pullback in discretionary spending – though we still expect these factors to eat into household purchasing power,” RBC said.
A poll of Canadian employers late last year found that consumers will likely see an estimated 4.2% increase in the national average base salary in 2023, although organizations will have to contend with a delicate balancing act between elevated inflation, recession risks, and the high-rate environment.
The survey conducted by consulting firm Eckler Ltd. found that the largest gains in average wages will be seen in British Columbia, Ontario, and Quebec. By industry, the greatest increases will likely be in the technology segment (5.4%), while the smallest upticks will be in the education, health care, agriculture, and hospitality sectors.