Canadian consumers are treading water financially, according to economist Todd Hirsch, who says household spending has stalled amid uneven income growth, persistent debt pressures and lingering economic uncertainty.
Hirsch said recent retail sales data show overall consumer spending has been essentially flat over the past year after adjusting for inflation. While total sales are up modestly, population growth means individual Canadians are spending roughly the same amount as they were a year ago. That stability suggests consumers have avoided a collapse in spending, but it also points to a lack of meaningful growth.
Interest rates have provided some relief. Hirsch noted that the Bank of Canada has lowered rates in 2025 and recently held its policy rate steady at 2.25%, creating a more favourable borrowing environment than in previous years. While consumers do not pay that rate directly, it influences mortgage and loan costs across the economy. He said the central bank appears comfortable with current conditions and is unlikely to make significant policy changes before the summer.
Hirsch cautioned, however, that averages obscure growing financial strain for many households. Some Canadians have seen income gains over recent years and are able to manage higher debt loads. Others have experienced stagnant or declining incomes and are living paycheque to paycheque, leaving them vulnerable to even small financial shocks.
Household debt is a growing concern, particularly among consumers relying on high-interest credit cards to cover essentials such as food and fuel. Hirsch said those borrowers face increasing difficulty escaping debt cycles and may soon hit financial limits.
Retail spending patterns reflect this stress. Hirsch pointed to a sharp increase in spending on used vehicles, while purchases of new vehicles have declined significantly. The shift suggests consumers are still meeting basic needs but are opting for lower-cost alternatives.
Looking ahead, Hirsch said retailers should closely monitor consumer sentiment data, including the Bank of Canada’s survey of consumer expectations. He added that concerns about tariffs and trade disputes are weighing on households and could influence spending decisions in the year ahead, even though those factors are beyond retailers’ control.
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