The Index of Consumer Spending is powered by exclusive consumer transaction data provided by Moneris Data Services. Moneris is Canada’s number one payment processor with over 3.5 billion transactions spanning more than 325,000 merchant locations. Our index tracks weekly year-on-year changes in consumer spending, enabling us to gauge economic activity levels across the country.
Document Highlights
After reaching 99.5 points in the week of June 26, the Index of Consumer Spending (ICS) fell for two straight weeks to an all-time low of 97.0 points during the week of July 10. However, the ICS recovered 2.9 points in the second half of July to reach 99.9 points. Despite trending upward toward the end of July, the ICS averaged lower this month than in June. Data on the ICS are available from the week of April 10, 2022, to the week of July 24, 2022.
The index has remained below the benchmark of 100.0 points for six consecutive weeks. This finding means that consumer spending has cooled and has yet to recover. Canadians have adjusted their spending habits to deal with the inflationary pressures over the last couple of months. High energy and fuel prices have contributed to a change in consumer behaviour as Canadians allocate a larger share of their weekly budgets to gasoline.
Year-over-year inflation fell to 7.6 per cent in July—gasoline prices dropped, which helped ease inflationary pressures. Inflation remains well above the ideal rate and is still a concern for Canadians. According to our Index of Consumer Confidence (ICC), many households felt less optimistic about current and future finances in July compared with June. The increase in trepidation contributed to the slowed growth in consumer spending in July.
The decrease in inflation will not sway the Bank of Canada. We expect interest rates to continue to climb until inflation is under control. Many Canadians, especially overleveraged Canadians, will feel the impact of these interest rate hikes and look to spend less and save more.
Canada’s unemployment rate remained unchanged at 4.9 per cent in July. However, employment levels decreased by 31,000 jobs. Interest rate hikes are expected to lower aggregate demand, which, in turn, will hurt employment. As the Bank of Canada’s tightening monetary policy works its way through the economy, we expect an uptick in the unemployment rate and a slight decline in consumer spending growth in the coming months.
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