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Shoppers at a Lowes in Toronto, on Oct. 6, 2020. Months into the COVID-19 pandemic in Canada and an economic downturn, consumer spending is now firmly above levels of a year ago.Melissa Tait/The Globe and Mail

Consumer spending has picked up in recent weeks as Canadians spruce up their homes and revamp their wardrobes, an encouraging sign for the economy as it grapples with a second wave of the novel coronavirus.

A trio of Canadian bank reports shows that spending on credit and debit cards remains stronger than a year ago, and in some cases has swiftly rebounded from recent wobbles.

Heading into the fall, it was uncertain whether a summer retail boom would fizzle after pent-up demand was satisfied. But early signs are that households can keep spending, bolstered by historic sums of federal income support for the underemployed.

With those benefits set to run well into 2021, it appears that consumption will avoid a significant backslide in the months ahead – provided there isn’t a return to widespread lockdowns that limit spending options.

“Consumer spending has been surprisingly strong, relative to other economic indicators,” said Colin Guldimann, a Royal Bank of Canada economist. However, “a big question for the consumer spending outlook is how much people will be able to find alternatives to things they would normally do indoors, and how much indoor activity remains unsafe.”

An RBC report published Monday found that overall spending in mid-September was up roughly 5 per cent, relative to a year ago. Spending on apparel, gifts and jewelry edged into positive territory for the first time since the COVID-19 crisis began, which “is reflecting some strength in back-to-school shopping,” Mr. Guldimann said.

Despite the cooler weather, golf remains a hot activity. “Golf spending has remained quite strong through what would normally be quieter weeks for courses,” Mr. Guldimann added.

Separately, a recent Toronto-Dominion Bank report found that consumer spending accelerated in September from an “August lull.” Over the first three weeks of September, total spending was on average 2.6 per cent higher than a year ago, improved from August’s 0.6-per-cent pace.

The key driver was higher spending on home renovations, at both hardware and furniture stores. In September, average weekly spending on home furnishings was up 27 per cent from a year ago, compared with 17 per cent in August.

“Since widespread lockdowns ended, this category has been running at a solid clip reflecting the red-hot housing market and spillovers from forced savings,” Sri Thanabalasingam, a TD senior economist, said in the report. “Unable to stray too far from home, Canadians have splurged on upgrading their homes.”

For its part, Bank of Nova Scotia found that spending slowed in early September, only to pick up later on. Again, hardware and apparel were standout areas, but so too was higher spending at grocery stores, which saw buying sprees during initial lockdowns.

As temperatures cool across the country, there’s been a natural slowdown in seasonal consumption patterns. Already, the RBC data point to less spending on travel, while bookings at restaurants have ebbed of late, a sign that diners were keen on patios when weather was warm, but are less interested in dining inside.

Beyond that, various provinces are starting to clamp down on service industries to tame the spread of the virus. Quebec has moved into a partial lockdown that has closed restaurants and bars for most of October in Montreal and Quebec City, save for takeout and delivery orders, along with other restrictions. With COVID-19 cases rising in other parts of the country, additional lockdowns may be required, affecting consumption.

“This next phase of the recovery will be the hardest yet,” Mr. Thanabalasingam said.

There is also the question of how the end of debt-payment deferrals – particularly for mortgages – will weigh on consumption. Further, a key caveat in the bank reports is that consumers are using less cash during the crisis, helping to boost expenditures on credit and debit cards.

Still, while spending options may be restricted by lockdowns, household finances are able to lean on jobless benefits. The unemployed are now moving over to employment insurance or the Canada Recovery Benefit (CRB), which provide at least $500 weekly in taxable income, or equivalent to the Canada Emergency Response Benefit. The CRB provides coverage for up to 26 weeks, and runs until September, 2021.

“I do think government support will continue to support incomes, and in that regard, will naturally support consumer spending,” Mr. Guldimann said.

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