Canadian cardholder spending holds up but momentum eases: RBC report

The pace of RBC Canadian cardholder spending outside of purchases at the pumps and autos moderated in May from the previous month, but remained positive, according to a new report.

“Our estimate of RBC’s core retail sales (excluding purchases of gasoline and autos) eased to 0.7% from 1.2% in April on a three-month average,” said the report, authored by RBC economists Abbey Xu and Rachel Battaglia.

“Higher gasoline prices continued to absorb a larger share of household budgets. However, limited pullback in spending by consumers on other goods and services implies households continue, for now, to dip into savings (or increase borrowing) to keep spending. 

“Essentials’ spending growth excluding gasoline moderated to 0.1%, but discretionary goods spending (ex-gasoline) continued to strengthen, suggesting consumers remain selective.

The details or the RBC report:

• Essentials’ spending increased 1.1% in May and remained up 1.3% on a three-month average, but largely reflected price increases in spending on gasoline. Growth excluding gasoline purchases was essentially flat, suggesting elevated fuel costs may constraining household budgets for other everyday necessities.
• Still, discretionary goods spending rose 1%, while the three-month average increased 0.7%, extending a steady improvement from near-flat readings earlier this year.
• Clothing, shoes and related apparel remained a notable source of strength with spending rising 1.8%, and maintaining a 1% three-month average gain.
• A 0.6% three-month average increase in household and construction-related purchases aligns with some evidence of stabilization in housing activity. It supports our view that while activity remains largely flat, some green shoots are beginning to appear in housing markets.
• Discretionary services spending rose 0.3%, and held at a 0.5% three-month average. Dining and entertainment spending softened in May, but both remained on a positive trend.
• Travel spending continued to lag other spending categories with the three-month average remaining negative at – 2%, suggesting households remain selective with larger discretionary purchases.

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