The latest TD debit and credit card spending data point to growing momentum, reinforcing a solid outlook for consumer spending. December data show spending growth accelerated to 7.2% year-on-year, up from November’s 4.0% and October’s 5.8%, said the bank in a report released on Thursday.
“The final quarter of the year showed TD Spend outlays ended on a reasonable note. Unlike the previous quarter, where seasonally adjusted monthly volatility muddied the signal, the fourth quarter’s monthly growth rates were consistently positive (albeit marginally in November). This indicates a likely solid performance for consumer spending in Q4. Despite this improvement, annual spending growth for 2024 remains the slowest in the past four years,” said the TD report.
“Encouragingly, growth in spending was broad-based, driven by both goods and services, with goods contributing more at the margin. Notably, home-related purchases (furniture, electronics, etc.) saw a significant acceleration, supported by looser financial conditions and a rebound in the housing market observed in October and, to a lesser extent, November.
“This drove Q4 growth in home-related items to 2.7% quarter/quarter (q/q)—a rate last seen in Q3 2021. Once again, this highlights the Canadian economy’s sensitivity to interest rate changes. Lower financing costs are also expected to make other durable goods, like autos, more affordable, supporting a potential rebound in vehicle sales. Overall, the outlook for durable spending appears strong.”
TD said spending on services regained momentum in Q4 after losing steam in Q3. Spending on recreation and entertainment was the standout performer in Q4, up 6.8% q/q, while spending on travel accelerated to a 3.6% q/q pace after modest gains in earlier in the year. On an annual basis, spending on entertainment and recreation outperformed travel, growing 8% versus 7%, while also experienced a smaller deceleration compared to 2023 figures. A weakening Canadian dollar has likely encouraged Canadians to spend more domestically, shifting their budgets from international travel to restaurants and entertainment.
“Services spending has been boosted by recent high-profile events like the Eras Tour in November and December, as well as the GST tax relief on prepared foods and beverages introduced on December 14, just in time for holiday gatherings with friends and family. We previously analyzed the Eras Tour’s impact on spending in Ontario and now tackle the challenge of identifying whether the GST tax break influenced consumer behavior,” added the report.
“Our analysis indicates that while spending did pick up in the second half of December, this same in-month pattern occurred in the previous two Decembers. This suggests it may just be the typical holiday shopping pattern. However, we don’t know whether without this relief the usual ramp up in spending might have been more muted. We will need to see results from subsequent months to see how much effect the GST holiday had on consume spending, but for now the jury is still out.”
The report said clothing stores and electronics and appliance stores — the key drivers of Boxing Day sales – saw no significant uplift, assuming discount rates were similar. This year, Boxing Day served as a somber reminder of the subdued spending trends, with all major categories recording declines compared to 2023. Although, this may reflect a shift in seasonal patterns as November’s Black Friday sales seem to be gaining popularity.
“Consumer spending gained momentum toward the end of 2024, supported by lower interest rates, which boosted consumer confidence, and external factors, such as the GST relief. The robust finish to Q4 aligns with our above-trend growth forecast for real personal consumption expenditure (+1.9% quarter-on-quarter annualized), with a solid near-term outlook for durable goods and services. However, uncertainty surrounding potential tariffs and retaliatory measures present a downside risk to our 2025 real consumer spending growth forecast of 1.7%,” concluded the report.
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