RBC Canadian cardholder spending remained on a positive trajectory with growth broadening across major spending categories, according to a recent RBC report.
“Our estimate of core retail sales rose 0.6% on a three-month average, building on July’s 0.5% gain,” said the report.
“Discretionary services continued to lead spending growth, supported by solid gains in travel, entertainment and arts. Discretionary goods spending also improved, while essentials spending remained firm, although gasoline continued to account for an outsized share of the increase.
“The latest card transactions data suggests household demand remained resilient heading into Q3. Spending patterns stayed uneven across categories, but continued gains across goods and services are consistent with a gradual recovery in domestic demand.
“Elevated trade uncertainty continues to pose downside risks in specific sectors/regions impacted by U.S. tariffs, but most exports continue to cross the border duty free, limiting the impact on broader aggregate growth and spending trends.”
In an interview with Retail Insider, RBC Economist Abbey Xu spoke about the report’s findings.
Question: What do the August spending figures tell us about the strength and resilience of Canadian consumers heading into the third quarter, and how does the current trend compare with earlier in 2026?
Answer: The August data point to continued resilience in household spending heading into the third quarter. What’s encouraging is that the strength has become somewhat broader. Core retail spending rose 0.6% on a three-month average in August, building on the 0.5% increase in July, while we also saw gains across discretionary services, discretionary goods and essentials.
That’s a somewhat stronger picture than earlier in the year, when spending was more uneven and households were absorbing the initial hit from higher energy costs. It’s also consistent with the broader economic data: growth rebounded in Q2, employment conditions have improved after a softer start to the year, and wage and salary income posted its strongest quarterly increase in almost two years.
So, we wouldn’t characterize the consumer as booming, particularly with gasoline prices still squeezing purchasing power, but household demand has proven more resilient than we might have expected earlier this year.
Q: What factors are driving the stronger growth in discretionary goods and services spending, particularly in travel, entertainment, dining and household-related purchases?
A: There are probably a few factors working together. Labour market conditions have improved since the spring, which has been supportive of household income and spending. We’ve also continued to see strength in experience-related categories, with travel, entertainment and dining spending all increasing on a three-month average in August.
On the goods side, stronger household and construction-related spending is also broadly consistent with signs that housing activity is starting to stabilize. Nationally, activity has improved from the very weak levels earlier this year, although the recovery remains gradual and quite uneven across regions. To the extent that more buyers return to the market, that can generate some follow-on demand for furniture, renovations and other household-related purchases. But we’d be cautious about attributing all of the recent increase directly to housing.
Q: Gasoline spending accounted for a significant portion of the increase in essentials spending, while grocery spending was much more modest; what does this divergence tell us about how Canadians are allocating their household budgets?
A: A large part of the increase in essentials spending isn’t necessarily households choosing to consume substantially more, it reflects the higher cost of filling up. Spending at gas stations rose 1.7% on a three-month average in August, compared with just 0.2% for groceries.
That matters because gasoline is difficult for many households to substitute away from in the short run. Higher fuel bills effectively absorb a larger share of household budgets and leave less room for other purchases, particularly for lower-income households. That’s why we continue to view elevated energy prices as a headwind to purchasing power even though overall consumer spending has remained resilient.
The encouraging part is that, so far, we haven’t seen evidence that this squeeze is producing a broad pullback in spending elsewhere. But the longer energy prices remain elevated, the greater the risk that households eventually have to make those trade-offs.
Q: Clothing, footwear and related apparel spending was essentially flat in August while household and construction-related spending grew more strongly; what are you seeing in these trends and what might they mean for retailers heading into the fall?
A: We wouldn’t read too much into weakness in any single category, particularly given the volatility in card spending data. But on a three-month average, there is a noticeable divergence, with household and construction-related spending rising more strongly while clothing and footwear spending was essentially flat.
One potential support for household-related retailers is the tentative stabilization we’ve been seeing in housing. Nationally, activity has improved from the very weak levels earlier this year, but the recovery remains gradual and uneven across regions. More housing transactions can generate follow-on demand for furniture, renovations and other household goods. At the same time, we’re still a long way from a strong housing cycle, so we wouldn’t expect that alone to drive a major acceleration in retail spending this fall.
Q: Spending growth varied significantly by province, with P.E.I., Alberta, Saskatchewan and Manitoba among the stronger performers; what is behind these regional differences, and what impact could U.S. tariffs and ongoing trade uncertainty have on consumer spending in the months ahead?
A: We’d be cautious about reading too much into individual results for some of the smaller provinces, where our cardholder sample is more limited. More broadly, there are a few factors behind the regional differences.
Alberta’s relative strength is consistent with a stronger economic backdrop and continued population growth, while higher gasoline prices are also boosting nominal spending in some regions. That effect can be particularly important in the Maritime provinces, where gasoline accounts for a relatively larger share of household spending.
Ontario and Quebec, meanwhile, have held up relatively well despite a softer economic backdrop and greater exposure to trade uncertainty. Some of that resilience could reflect the lagged effects of earlier population and household income growth, as well as households drawing on savings or credit to support spending. B.C. has been softer, more in line with weaker economic growth in the province.
Looking ahead, trade uncertainty remains an important downside risk, particularly for communities and households tied to affected industries. But our base case is still that the tariffs imposed so far are more of a sector-specific shock than an economy-wide one. The latest Section 338 measures affect a relatively small share of Canada-U.S. trade, so we don’t expect them by themselves to derail consumer spending nationally. The larger. risk would be a broader escalation in the trade dispute that starts to weigh more materially on employment and household confidence.
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