Canadians have holiday sales ‘hangover’

Retail sales spending (excluding autos) softened for a second consecutive month in January. Weakness in grocery spending and clothing sales more than offset gains in other categories like gasoline and furniture sales, says the RBC Consumer Spending Tracker. 

Households pulled back from spending on discretionary goods – typically the first budget line item to be cut when households feel the pinch of higher debt payment obligations. On top of that, aggregated consumer data understates how stretched Canadian households really are. Real per capita retail sales (excluding autos) have declined for six consecutive quarters as of the fourth quarter.

While households posted a surprisingly strong fourth quarter, the RBC Tracker says this is not expected to last. If December and January are any indication, Canadian households are clamping down on spending. Retail activity is expected to be dormant in the first quarter of 2024 and largely flat as households cool off from hefty pre-holiday spending when shoppers contended with higher price tags.