Consumer spending hit full speed as Omicron variant arrived. Might a touch of restraint be called for?

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There was a brief moment back in the early days of the COVID-19 pandemic when it seemed possible that economic shocks would lead to a new emphasis on frugality.

The internet saved us from all that. While travel, entertainment and other services were curtailed by economic lockdowns, online shopping allowed households that were financially untouched by the pandemic to keep spending.

With stores fully reopened for the most part, we’re back to shopping with both barrels. Until the Omicron variant of COVID-19 appeared, this splurging was defensible and even helpful for the economy. Now, you have to wonder if a touch of restraint is called for.

Signs of avid buying are starting to pile up. The latest Consumer Spending Tracker from RBC Economics says household spending in November was more than 20 per cent higher than it was before the pandemic shocked the economy. In a survey of holiday season spending plans, PwC found that consumers plan to boost spending by 29 per cent this year over last, to an average of $1,420.

In its most recent consumer debt report, the credit monitoring company Equifax said “Canadians are giving their credit cards a workout heading into the holidays.” The average spend per credit cardholder was up almost 4 per cent in the third quarter of 2021 when compared with the same period of 2019, mainly driven by consumers under the age of 35.

Growth in balances on home equity lines of credit flatlined early in the pandemic, but now they’re on the rise again. The Better Dwelling blog said HELOC balances jumped $1.7-billion in September alone to $270-billion.

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There a faintly frenetic feeling to all this spending – a sense of self-medicating with retail therapy. A late-November poll from the Angus Reid Institute suggests the treatment isn’t doing the job for many people. Just over 40 per cent of participants said this year feels more financially stressful than most holiday seasons, while 53 per cent said it was more emotionally stressful.

If you want to treat yourself after what we all can agree was a hard year, then do it. Anyone who thinks smart money management depends on denial does not understand humans. They need some upside.

Just be smart about it by avoiding debt. Dip into your savings if you’re fortunate enough to be one of those households that used pandemic lockdowns to pile up savings. At peak, the savings accounts of the nation held $200-billion to $300-billion more than they would have in normal conditions.

Some of that money has been drawn down, but there should be plenty left to top up household Plan B funds for emergencies, do some judicious backfilling of tax-free savings accounts, registered retirement savings plans and registered education savings plans, and then pay for fun stuff.

A payment option to avoid this holiday season is something people are calling buy now, pay later, or BNPL. Globe and Mail personal finance editor Roma Luciw and I take a close look at BNPL in the latest episode of the Stress Test personal finance podcast for millennials and Gen Z. Basically, you buy something online – makeup, electronics, clothes, plane tickets – and pay for it with several biweekly or monthly amounts that don’t include fees or interest in most cases.

BNPL is catching on with young people in particular. The concern with the holiday season at hand is that they’ll get caught up in the spending binge already happening and make multiple purchases on the instalment plan. It may be hard to keep up with all of them in the new year, especially if inflation keeps undermining our spending power.

There’s reason to be optimistic about the spending choices people are making these days. Equifax said the average credit card balance in the third quarter was 1.9 per cent lower than the same period a year earlier. Also, the average non-mortgage debt per person fell 1.7 per cent on a year-over-year basis to $20,739 in the third quarter.

A little of that former urgency about frugality may just have rubbed off on us. With Omicron lurking, this would serve us well.

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