With the busiest shopping season underway, Canadian consumers are showing signs they’re out of steam and pulling back on spending, potentially dragging down the economy with them, according to an analysis from the Bank of Montreal.
BMO deputy chief economist Douglas Porter wrote on Tuesday that Canada is on track to mark the slowest annual rise in real consumer spending since 1993 — save for the nasty 2009 dip in spending following the financial crisis.
“While consumer outlays were one of the rare areas of strength in Friday’s Q3 GDP report ... the underlying trend is much less impressive,” Porter wrote. “In the past four quarters, real spending is up a mild 2.2 per cent. And, for all of 2012, real consumption looks to rise just 2 per cent.”
Porter noted that “a cooler consumer has played an important role in this year’s broader slowdown,” adding that the Bank of Canada "said in October that the consumer is likely to lead growth. Lower, perhaps.”
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The report squares with an earlier study from RBC, which forecast a 6-per-cent decline in holiday spending this year, with the average Canadian holiday shopper shelling out $1,182 this season, compared to $1,251 in 2011.
But the report doesn’t square with an earlier analysis from BMO itself, which forecast a 15-per-cent jump in holiday spending, to $1,610 this holiday season, up from $1,397 in 2011. (BMO and RBC use different methodologies, which is why their estimates don’t match.)
BMO said larger paycheques were behind the projected spending increase, as well as Canadians having more people to shop for this year.
Canadians’ debt loads have reached record levels in recent years, pushed up by rising house prices and increase use of home equity loans. With a ratio of average debt to average income above 160 per cent, Canadians are among the most leveraged consumers in the developed world.