RBC is out with its monthly Canadian consumer spending tracker and the picture is positive, with spending increasing across almost all categories.
Retail sales, excluding motor vehicles, experienced significant growth during the month, largely driven by an uptick in home-related purchases, sporting goods, and clothing. These trends indicate a broader seasonal trend as Canadians prepare for summer, according to the April spending tracker from RBC. The metric is based on the credit card data of Canada's largest bank.
They noted that spending on the category of home furnishings, renovation materials, and garden supplies saw its first notable increase in a year, while building materials accounted for nearly a third of April’s overall spending increase. Other strength was in hotels and restaurants.
The lone categories that saw decreases were groceries, gasoline, and miscellaneous goods.
Overall, RBC doesn't think the strength in spending will last:
April RBC consumer spending data marked a stronger start to Q2 than we expected. But one month does not make a trend. We are cautiously optimistic that consumer activity will improve this year- as adjustment to higher rates hits households less hard in 2024. The question is- will consumer optimism prevail into summer? Labour market headwinds have been building with the unemployment rate up one full percentage point from a year ago and layoffs rising in recent months. A ramp up of business insolvencies in Q1 alongside higher household credit delinquency rates add to these headwinds. We continue to expect consumer spending to pick up in the back half of the year once BoC cuts are underway, likely starting in June
