January 31, 2022

Weekly EconMinute—Consumer Spending Habits

In this week’s EconMinute, we’re talking about changing consumer spending habits since the pandemic.

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COVID-19 has caused a notable shift in how Canadians spend their money. During the early days of the pandemic, spending on most goods and services plunged, with total household expenditures falling by about 16% from Q4 2019 to Q2 2020 in real, inflation-adjusted terms.

As of Q3 2021, overall consumer spending has more or less recovered. However, what we’re spending our money on today is different from what it was two years ago.

  • Canadians are buying more durable goods, especially furniture, hardware, and other household items. Expenditures on those products rose throughout the pandemic and currently sit about 9% above pre-pandemic levels.
  • Purchases of alcohol, tobacco and cannabis also spiked. Inflation-adjusted spending on those goods had been flat for years leading up to the pandemic but have since jumped by nearly 8%.
  • After falling by 20% in the early months of the pandemic, household spending on services have recovered most of that lost ground, but remain about 4% below pre-pandemic levels.
  • Much of the gap in spending on services is the result of an ongoing steep decline in spending on transportation services (-15%) and hospitality (-10%).
  • Meanwhile, spending on unavoidable necessities like food and beverages, housing and utilities, and insurance and financial services has been largely unaffected.

Finally, it’s worth noting that the increase in consumer spending on durable goods is contributing to Canada’s rising inflation rate. Strong demand is magnifying the impact of supply chain shortages, helping to drive goods prices higher.

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