People make their way through Toronto Pearson International Airport, on March 14.Chris Young
Canadians are continuing to spend on holidays and non-essential services, but are cutting back on restaurants and goods, according to the findings in a new report from Royal Bank of Canada.
RBC’s latest spending tracker found that while overall spending was steady in March, there were some signs of weakness in goods spending, mirroring a pullback in auto sales.
Auto sales in March were up 3.7 per cent, according to DesRosiers Automotive Consultants Inc., but the seasonally adjusted rate of sales was 1.59 million, lower than the first two months of the year where that measure was around 1.7 million.
When adjusted for inflation, restaurant spending fell by 0.6 per cent on average in the first quarter of 2023, a relatively small decline, said RBC economist Carrie Freestone.
RBC’s spending tracker shows that while spending on goods is slipping, spending on non-essential services is still strong.
Freestone said RBC expects to see a more pronounced pullback in discretionary spending once the effect of the Bank of Canada’s interest-rate hikes is fully felt.
The central bank paused rate hikes at its most recent meeting in order to let their effects work through the economy.
Consumer spending is one of several economic data points that has remained resilient despite persistent inflation and rising interest rates.
In the fourth quarter of 2022, despite real GDP being unchanged, consumer spending was up 0.5 per cent.
The central bank’s next rate decision is scheduled for April 12.
RBC’s February report found Canadians were making fewer grocery store runs but still spending around the same amount per trip.
Meanwhile, in March, the number of grocery transactions was essentially flat.
Food inflation has been outpacing overall inflation, with the price of groceries up 10.6 per cent year over year in February compared with 5.2 per cent for overall inflation.