Canadians focus holiday spending on gifts, brick-and-mortar stores after tax holiday launch
Canadians ramped up their holiday spending in December, reversing a slow start to the shopping season in November, according to the RBC Consumer Spending Tracker.
The rebound followed the implementation of a federal GST/HST tax holiday announced on November 21 and effective from December 14 to February 15.
This measure aimed to alleviate affordability pressures for Canadians, covering goods such as children’s toys, beer and wine, restaurant meals, and Christmas trees.
RBC Economist Carrie Freestone stated that December “marked a sharp reversal” in consumer activity after November’s sluggish performance.
She highlighted that “while Black Friday shopping was softer this year than last, total spending over the holidays was slightly above year-ago levels.”
Data from the tracker shows that spending peaked during the two weeks leading up to Christmas, typically the busiest shopping days of the season.
Despite this increase, overall holiday spending trends aligned closely with 2023 levels, reflecting only a marginal improvement in year-over-year activity.
The federal tax holiday may have contributed to the shift in consumer behaviour.
Freestone noted “a noticeable pullback” in spending immediately after the tax holiday’s announcement, followed by a “material pickup” in in-person spending after December 14.
Brick-and-mortar spending, in particular, saw significant increases during the peak shopping period, while online spending surged during key events such as Cyber Monday but later tapered off.
However, spending on books, music, journals, photography, hobbies, toys, and games lagged behind 2023 levels. Canadians redirected spending towards gifts of entertainment, art, clothing, and jewellery, which saw greater demand this year.
Nominal retail sales excluding autos likely increased in the fourth quarter (Q4), supported by December’s rebound.
Freestone reported that “our cardholder spending activity was very weak in November, but a rebound in December more than made up for the pullback, with spending returning to trend.”
Categories like clothing, shoes, furniture, electronics, gas, and building materials drove much of the growth.
This aligns with data showing total RBC cardholder spending rising sharply in December, recovering from November’s low levels.
Real per-capita spending trends showed a second consecutive increase in Q4, despite slowing population growth.
Data from RBC indicates that real per-capita retail sales excluding autos tracked a modest upward trajectory, with forecasts suggesting continued improvement into 2024.
Discretionary spending on goods surged in December, outpacing spending on services. This sharp increase marked a significant recovery following months of fluctuating activity throughout 2024.
Economic growth in Q4 remained soft, with gross domestic product (GDP) increasing by an estimated 1.5 percent, slightly above the 1 percent rise in Q3.
Risks persist, including protectionist US trade policies from the incoming Trump administration, but Freestone noted that lower interest rates are expected to support stronger real per-capita consumer spending in the coming year.
Hospitality-related spending also showed signs of improvement.
Canadians increased spending on hotels and dining out in December, but the overall trend for food services and drinking establishments remained subdued.
Seasonal spending fluctuations reflected broader economic uncertainties.
