Canadian consumer spending held up in May—building on April’s momentum—despite cooling economic growth, according to RBC’s cardholder transactions.
“Our tracking shows a 0.7% increase in total retail sales in May, and spending was firmer up 1.1% excluding auto sales. Auto purchases have cooled in recent months following a surge in March, but underlying consumer demand appears to be resilient across most categories,” said the RBC report by Economist Abbey Xu.
“Statistics Canada’s advance estimate for April’s retail sales (pre-tax excluding the impact from the removal of the consumer carbon tax) showed a 0.5% month-over-month increase, consistent with the underlying strength we’ve seen in our own spending data.”
RBC said it added a new lens this month with core retail sales, which strips out more volatile components like auto and gasoline spending. This measure climbed by 1.2% in May by its count, reflecting solid momentum in broader household purchases.
“Gasoline spending, while volatile in recent months, rose slightly by 0.3% in May following a sharp decline in April that coincided with the removal of the consumer carbon tax. Interestingly, excluding gasoline spending revealed slightly stronger retail sales growth overall—suggesting robust activity in other categories,” said RBC.
“Motor vehicle sales, which surged in March amid concerns about U.S. auto tariffs, have since moderated. Our cardholder data does not capture a large portion of auto sales, but our in-house seasonally adjusted estimates based on industry reports point to a 2.6% decline in April car sales followed by another 2.8% drop in May. Still, two consecutive declines weren’t enough to fully offset the strength seen in March, pointing to a gradual normalization in auto purchases rather than a sharp reversal.”
The report said overall spending remained solid in May, but key categories showed signs of cooling compared to April.
“Discretionary services continued to lead with spending rising 1.2% from April. Essentials followed closely up 1.1%, while discretionary goods posted a more modest gain of 0.5%. Despite the slower momentum, all three categories remained in positive territory, pointing to continued underlying strength in household demand,” explained RBC.
“Within discretionary goods, clothing led the gains rising in May. The increase likely reflects promotional sales and shifting consumer demand heading into the summer season. In contrast, building materials saw the sharpest pullback falling 1.5%, aligning with broader signs of slowing housing-related activity.”
Meanwhile, travel spending posted its first monthly increase of the year, rising 4.7% in May after several months of cumulative declines, noted the report.
“The rebound likely reflects more Canadians opting to travel domestically with international travel—particularly to the U.S.—still subdued. As we’ve noted, when Canadians stay closer to home, it tends to support local tourism and hospitality industries.”
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