Canadian consumers continued spending through another challenging quarter, likely drawing on savings or taking on more debt to maintain consumption patterns amid weak real wage gains and higher energy costs, according to a report by RBC Economics.
RBC’s Q2 cardholder transactions show overall spending accelerating, consistent with signs of improvement in the broader economy—though some of the gain likely reflects spending to keep up with rising gasoline prices, said the report by economists Rachel Battaglia and Abbey Xu.
“Beyond the energy pull, RBC’s core retail sales (excluding spending at gas stations) rose 2.4% in Q2 from Q1, pointing to broader consumer strength. Purchases of essentials excluding fuel grew 2.2%, matching growth in discretionary services spending—where cardholders prioritized social experiences during the summer event season,” wrote the economists.
“Cardholder spending on discretionary goods rebounded 3.7% from Q1 following a weak year and a half. Household and construction purchases saw its first quarterly gain since mid-2025, coinciding with early signs of renewed homebuyer interest. Spending on clothing and apparel also strengthened after a slow start to the year.”
The report said major events—like FIFA World Cup matches in Toronto and Vancouver and The Calgary Stampede—temporarily boosted dining and entertainment activity in specific time periods and locations, but likely had limited impact on overall Canadian spending growth. International visitors may have offered a larger temporary spending boost during these events. However, RBC cardholder data reflects spending by Canadian cardholders in Canada, not by international visitors.
“Underlying strength in spending suggests consumers broadly contributed to gross domestic product growth in Q2. We remain cautiously optimistic that the consumer and economic backdrop will continue to improve gradually over the remainder of 2026, though high energy costs—still cutting into household purchasing power—remain a risk,” explained the economists.
Since energy prices spiked in early March, consumers have been allocating a larger share of their spending to gas stations, likely sustaining broader spending growth by collectively saving less or borrowing more—a trend that can’t persist indefinitely, said the report.
“Still, under the surface fundamental drivers of consumer spending have also been improving. The unemployment rate fell to its lowest in two years (6.4%) in July from a recent 6.9% peak in April, and employment bounced back after large declines earlier this year,” said RBC.
“U.S. tariff risks remain, but business investment is tracking a sizable increase in Q2. More businesses also plan to add jobs in the year ahead than pull back, suggesting they’re adapting to the uncertainty.
“Household insolvencies have likewise shown signs of stabilizing after rising for much of the last four years, and—controlling for the earlier surge in population—remain below levels before the pandemic on a per-person basis.”
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