A recent survey by Stifel Financial Corp. suggests that consumer confidence has improved recently, highlighted by the sequential increase of 600bps in spending intentions on discretionary items and the annual increase of 700bps on spending intentions for the holidays.
The company said it is the first time in five quarters that a majority of respondents (54 per cent) indicate a willingness to increase their spending on discretionary items, suggesting that the depressed consumer spending patterns seen in the last 12-18 months could rebound.
“The increase in spending intentions for the holidays is noteworthy and is the highest of the last four years. Of the seven categories we track, spending intentions on pet food and pet accessories have increased the most sequentially. This survey is positive for Pet Valu, Dollarama, Aritzia, Gildan, Premium Brands, Kits Eyecare and mixed for BRP and Spin Master,” said the company of its clients.
“We believe that Canadians are encouraged by inflation abating and interest rates declining. This translated into healthy spending intentions for the Holidays. According to our survey, spending intentions for the holidays have increased by 700bps vs last year, to reach 49 per cent, the highest level of the last four years. These results bode well for the upcoming holiday shopping season where we should see better spending patterns than last year,” said Martin Landry, Managing Director of Stifel.
“It is still early to project how consumers will react in 2025, but if the results of our last two quarterly surveys are an indication, we believe that consumer spending could continue their rebound in 2025 and grow at a pace close to historical levels. Obviously, further reductions in interest rates will go a long way to bring back confidence and stimulate spending.”
Stifel’s key findings from the report:
- 54 per cent of respondents expect to increase their spending on discretionary items in the coming 12 months, up 600bps sequentially from July 2024. Most of the increase comes from respondents who answered “my spending will increase slightly,” which suggests that it is a tempered increase in spending intentions, but positive nonetheless. Regionally, there has been a material increase of 1,400bps sequentially in Ontario, a positive surprise which could come from increased confidence due to declining interest rates as house prices and affordability are issues predominant in Ontario;
- Spending intentions for the holidays have increased by 700bps vs last year, to reach 49 per cent, the highest level of the last four years. We saw a significant increase in spending intentions from 18- to 34-year-olds. Holiday spending intentions for respondents in that age group have increased by 1,500bps vs last year, a positive for Spin Master as this age group is the likely target market to buy children toys. This would suggest that the young demographic may indulge more this holiday season than last year, which is also a positive for Aritzia, given the company over indexes with young women;
- 55 per cent of respondents to our survey expect to increase their spending on clothing and apparel in the next 12 months. This is the third-straight quarter of spending intentions above 50 per cent, suggesting a continuation of expansionary spending patterns for the clothing and apparel category. We have seen a pivot in the answers with spending intentions of female respondents declining 600bps sequentially from July, while spending intentions for males are up 800bps sequentially. This would be a negative read-through for Aritzia. However, this may be partly offset by a sequential increase of 800bps in spending intentions for respondents earning an income above $75k, traditionally the target market of Aritzia;
- 74 per cent of the respondents to our survey indicated that they would increase their spending on pet food and accessories in the next 12 months, an increase of 400bps sequentially and 800bps Y/Y. This is the highest level in the last six quarters and is a positive for Pet Valu. However, similar to other categories, the increase comes from respondents who have answered “my spending will increase slightly,” hence, while this is positive, it needs to be taken into account when interpreting the results given that we have seen a slight decrease of 100bps sequentially in the respondent answering “my spending will increase significantly.”;
- 7 per cent of respondents to our survey indicated being “very likely to purchase or upgrade a powersport vehicle in the next 12 months, a decline of 170bps sequentially. Spending intentions by male respondents decreased by 130bps sequentially, males being the key target market for the powersports industry. However, looking at the younger demographics paints a different picture. 11 per cent of respondents aged 18 to 54 said they were very likely to purchase or upgrade a powersport vehicle in the next 12 months, an increase of 110bps sequentially;
- According to our survey, 73 per cent of respondents expect to increase their spending at dollar stores in the next 12 months, up 200bps sequentially. This is the highest reading of the last five surveys and suggests that the dollar store channel remains a favorite place for Canadians to stretch their dollars;
- 49 per cent of respondents to our survey expect their spending on toys to increase in the next 12 months, a decrease of 500bps sequentially. Amongst the past five surveys, this is the first time that spending intentions are below 50 per cent, suggesting that toys could be a category where Canadians may reduce spending in the coming months. However, within respondents aged between 18 and 54 years, an important cohort representing parents, spending intentions remained stable Y/Y at 58 per cent. These results are mixed for Spin Master, in our view.
Related articles:
