TD Spend data points to volatile consumer spending in recent months.
After finishing 2025 strong, outlays weakened in a storm-affected January and rebounded in February. Real consumer spending is tracking a 1.2% (annualized) pace in the first quarter, down from 1.7% in Q4 2025, according to a recent report.
The report, by Economist Maria Solovieva, said goods spending has recently been driven by necessities. Housing-related spending, by contrast, has contracted for two consecutive months.
Services are reliably carrying the load. Travel and recreation remained the most resilient categories, suggesting that higher-income households appear to be the primary engine keeping spending afloat in early 2026, it said.
The report added that the Middle East conflict has brought higher gas prices and renewed market volatility, throwing yet another wildcard at consumers. Canadian households continue to fight one battle after another, with no intermission in sight.
“Canadian consumer spending started 2026 on a slightly softer footing. Our internal TD Spend data show that spending softened early in the year before stabilizing somewhat in February, leaving the three-month average growth rate at 0.8%, or roughly 9.5% annualized,” said the report.
“This pace is broadly consistent with nominal retail sales, which – while excluding services but including auto sales – are up 6.5% annualized on a three-month trend basis. On a year-on-year basis, TD Spend growth held near 5.0% with base effects from last year’s GST/HST tax break creating some noise across the winter months. Accounting for these signals, real consumer spending (PCE) growth in the first quarter is currently tracking around 1.2 % (annualized).”
The composition of spending over this period highlights a divergence in consumer preferences, said TD.
“Goods spending has been the main source of volatility. It finished 2025 on a remarkably strong note, before posting a notable pullback in January and partially recovering in February. Meanwhile, services spending has been steady, rising for three consecutive months. Weather likely played a role in these dynamics. The winter storm that swept across much of the country appears to have both frozen consumer activity in some areas and redirected spending in others.
“Spending on essential categories has dominated goods outlays. Over the past three months, spending at grocery stores, convenience stores and general merchandise retailers (which include wholesale outlets like Costco) collectively accounted for roughly 70% of goods spending growth, up from 40% a year ago, as spending on clothing, electronics and department stores has effectively fallen away. Food inflation picked up in the second half of 2025 and, at more than double the headline rate, continues to keep nominal grocery spending elevated.”
The recent spending data point to a consumer sector that remains resilient but increasingly battle-worn, said TD.
“Essential goods categories are holding up, while discretionary goods categories – particularly those tied to housing – are losing momentum. Services spending continues to provide forward momentum, but the support is narrower than the headline suggests. It rests largely on discretionary outlays like travel and recreation, which tend to be concentrated in higher income households.”
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