Canada’s uneventful, but huge debt and frothy shelter costs, may finally come home to roost. Credit rating-giant Transunion released the results of its Q3 2023 Consumer Pulse Survey. Amongst the insights was the share of households expecting to consume more, revealing how a country stacks up to its peers. When it comes to households spending more, Canada ranked dead last in most categories. This may mark the end of the spending boom, as households tighten budgets at a rate higher than our global peers.
Retail Spending Intentions & Global Context
Consumption data provides important insights for household sentiment and prosperity. Households spend more when they’re doing well, and confident in the economy’s future. They stop spending when they’re worried about their future, or experiencing shock. That’s bad news.
A wise person once said, one person’s spending is another person’s income. Households spending money means more potential revenue for suppliers and workers. That translates into higher wages, more jobs, and generally more opportunity. A contraction does the opposite—less money, lower wages, fewer jobs, less opportunity.
Today we’re looking at planned consumption over the next three months. In general, a greater share of households planning to spend more is better. Smaller shares mean more households have economic concerns, and plan to pull back. While spending less and saving might be good planning for households, reduced spending amplifies downturns in the broader economy.
Canadian Households Are Pulling Back On Cars & Appliances More Than Other Countries
First up, large purchases like appliances and cars. These are often called “hardgoods,” and lead the business cycle. Just 11% of Canadians plan to spend more in this area, making it dead last in the countries surveyed. In contrast, US households plan to spend nearly double (21%) more.
Source: Transunion
Topping the list were younger, developing economies. Rounding out the top three are the Dominican Republic (30%), Brazil (24%), and the Philippines (24%). One of those countries is a major source of Canadian immigration. That may end the population boom, since people don’t usually leave more confident economies.
Debt Heavy Canadians Don’t Plan To Do Much Discretionary Spending
Discretionary personal spending is another extremely important area, largely service-related. Shifts in this area have a big impact on labor, since it’s consumer-facing. Just 15% of Canadians plan to spend more in this area, the smallest share on the list. Not having any extra money to spend on discretionary services can lead to a big loss of jobs for the segment.
Source: Transunion
Intentions in the US are considerably higher, with 22% of Americans planning to spend more. However, the list was once again topped by the Dominican Republic (29%), Philippines (27%), and Brazil (24%).
Do You Even Christmas, Bruh? Canadians Plan To Trim The Retail Fat
Canada also lagged when it comes to retail shopping, either online or in-store. Only 17% of households planned to spend more in the next three months, putting Canada in last place again. The US was somewhere in the middle with 24% of households planning to spend more. Where the heck did everyone’s pre-game Christmas spirit go?
Our now usual suspects lead when it comes to retail spending intentions. The Philippines (34%) tops the list, followed by Columbia (27%), and Brazil (26%).
Source: Transunion
Spending More On Wireless Is Still As Canadian As Maple Syrup & Money Laundering
Digital services include cable TV, internet, and wireless. The survey reveals 15% of Canadians plan to spend more in this area. In contrast, the US showed 23% of households plan to spend on digital services in the next few months. The list was topped by the Dominican Republic (32%), Philippines (31%), and South Africa (23%). Only Hong Kong (13%) had a smaller share of households than Canada. Canadians are more confident they’ll spend more on wireless service? That’s a shocker.
Source: Transunion
Canada doesn’t have the same level of consumer confidence as its economic peers. That will be a limiting factor for already slowing economic growth, which not even the population boom is helping. It’s bad news, but not entirely surprising with shelter costs and debt loads. Especially when put in context with the rest of the world.
Earlier this month Canada’s largest bank issued a similar warning due to shelter and debt. RBC research revealed that young Canadian adults face much worse conditions than previous generations. In terms of wealth, older households more than made up for the hit young adults took. The net impact is very different though, since younger households drive spending. Ultimately this will result in slowing economic growth—an issue reflected in OECD data.
At the same time, the data reveals more robust intentions in developing countries. Developing countries with younger populations, and more robust economic growth. These countries are usually large sources of immigration that have fueled Canada’s growth. That presents a new problem for Canada’s policymakers: how long can the economy attract talent from places with more robust economic opportunities?
