Consumer spending

Consumer spending in Canada is expected to reach $1,446.5 billion in 2025, representing real growth of 2.5% over the previous year. The increase reflects the impact of Bank of Canada interest rate cuts that have encouraged households to spend rather than save, though spending remains constrained by elevated inflation and ongoing trade uncertainty with the United States. Despite weak consumer confidence levels tied to tariff threats and trade policy volatility, actual spending has proven more resilient than sentiment measures would suggest, with households drawing down savings rates to maintain consumption levels.??

Canadian consumer spending has demonstrated remarkable resilience over the past five years, recovering from the pandemic-induced collapse of 2020 when expenditure plummeted 6.3% to $1,213.0 billion. The recovery was swift and substantial, with spending surging 5.8% in 2021 as pandemic restrictions eased and pent-up demand was released. Strong growth continued through 2022, with spending climbing 5.5% to $1,352.9 billion, driven by revenge spending patterns and robust wage growth that outpaced the impact of rising interest rates.??

The pace of growth moderated significantly beginning in 2023, with spending increasing just 1.9% as aggressive Bank of Canada rate hikes took effect. Household purchasing power came under pressure from multiple fronts - mortgage renewal rates jumped dramatically for fixed-rate holders, food prices remained elevated with grocery inflation running above headline rates, and discretionary goods spending weakened considerably. The composition of spending shifted markedly toward services and away from goods, with Canadians reducing spending on clothing, electronics, and home-related purchases while maintaining relatively stable outlays on dining, entertainment, and travel.??

Growth recovered modestly to 2.4% in 2024, supported by cumulative interest rate reductions of 125 basis points that began in June 2024. However, spending patterns remained uneven throughout the year, with consumers pulling back on discretionary goods categories while home-related spending showed signs of improvement as housing market activity picked up following rate cuts. The savings rate declined as households prioritized consumption despite ongoing labor market softness and persistent inflation in essential categories like food and gasoline.??