Canadian spending, excluding automotive, increased by seven per cent year over year in August and was up 18.8 per cent from three years ago, according to the Mastercard SpendingPulse, which measures in-store and online retail sales across all forms of payment.
The report indicates spending has well surpassed pre-pandemic levels.
“As Canadians rounded out their summer with last-minute vacation plans and families preparing for the back-to-school season, it’s not surprising to see both an increase in retail sales and in-store spending,” said Steve Sadove, senior advisor for Mastercard and former CEO and Chairman of Saks Incorporated.
“You have very similar patterns going on in Canada and the US where you have a consumer that’s still spending . . . But when you look at inflation, at roughly seven or eight per cent, you’re essentially seeing very little unit growth and the consumer’s treading water relative to the real increase in spending.
“It’s not terrible. It’s a pretty healthy number. You continue to see the slowdown in ecommerce and people getting back into stores and getting back out and experiencing. So the trend we talked about last month, experiences win, people are wanting to get out. I think apparel continues to be very strong and that to me is about the freshness, the getting out of their sweat clothes and into parties and weddings. That to me is a trend that is continuing.”
Sadove said with food inflation so high fewer people are eating out these days.
The report found:
- In-store sales increased (7.8 per cent YOY) with a significant surge in Apparel (37.4 per cent YOY) ahead of back-to-school season and it was up 18.8 per cent from three years ago;
- Fuel and Convenience also saw an increase (18.5 per cent YOY), as consumers took their final summer road trips;
- Home Furniture and Furnishings continued to see growth with sales up 12.8 per cent YOY (+30.8 per cent YO3Y) with Home Improvement sales up 11.7 per cent YOY (+24.9% YO3Y), a consistent trend since the start of the pandemic; and
- With summer coming to an end and gas prices softening, last-minute road trip plans remained top of mind for Canadians with Fuel and Convenience spending up 18.5 per cent YOY (+32.8 per cent YO3Y).
The Mastercard SpendingPulse reports on national retail sales across all payment types in select markets around the world. The findings are based on aggregate sales activity in the Mastercard payments network, coupled with survey-based estimates for certain other payment forms, such as cash and check. The Mastercard SpendingPulse defines “Canadian retail sales” as sales at retailers of all sizes, excluding automobiles. Sales activity within the services sector (for example, travel services such as airlines and lodging) are not included.
Sadove said electronic sales were weaker because people bought everything they needed during the pandemic.
“But they’re still fixing up their homes,” he said.
“It’s really fascinating. If you look at 2022 and 2019, and you focus on what’s happened . . . and what you see is overall retail up about 19 per cent in the three-year period . . . Over three years, the consumer is more back to normal in terms of their consumption that they had longer termed trended on.
“Internet has grown. It’s about 12 to 18 per cent of commerce. So internet has gotten a lot bigger.”
Sadove said there has been a reversion to the mean and the trends that were taking place pre-pandemic are what people are experiencing now.
“You’re getting back to a more normalized environment and that’s where a lot of retailers messed up because they bought inventory, they assumed the world was going to continue the way it was and it didn’t. And it went back to more normal so they’re sitting on a lot of inventory of the wrong inventory,” he added.
Sadove said the consumer will continue to spend during the holiday season. They’re going to be under pressure. Inflation is hurting the lower part of the income levels. Many companies still have too much inventory so there will be plenty of promotions.
“My guess is the holidays will start earlier than ever because people will be clearing out some of those inventories. And if there’s freshness, new apparel, new items, new fashion, that will sell. People are still going to be out there buying their holiday gifts but they’re going to have to be making choices and they’ll be shopping carefully focusing on value,” he said.
“I’m concerned. You look at the numbers whether it’s the stock market or any of the markets, how the consumer is behaving, there’s a skittishness out there. And people are a little bit concerned so I think value is going to be an important word, promotions early, but continued spending. And omnichannel. Ecommerce even at four per cent growth doesn’t matter, it’s still 50 per cent, 60 per cent bigger than what it was.”
