The Index of Consumer Spending fluctuates as uncertainty drains confidence in the first quarter of 2025

In partnership with the Conference Board of Canada, we are pleased to present the following authoritative insights from their Index of Consumer Spending (ICS) which has been Powered by Moneris^® Data Services. Our industry-leading consumer spending data and insights from point-of-sale activity combined with The Conference Board of Canada’s expertise provides a coast-to-coast perspective on how the economy is trending.

Tax Breaks and Trade Chaos in the First Quarter of 2025

• The Index of Consumer Spending (ICS) averaged 101.7 points in the first quarter of 2025—a 1.9-point increase year-over-year.  
• In January, the ICS score fell to 101.7 points — a decrease on the previous month. The decrease in January was expected following the holiday spending baked into December’s result. Typically, after a burst of spending over the holidays, consumption moderates.  
• February’s score was lower than expected at 98.6 points. Spending usually rises in February compared to January. However, consumer spending was hit by the effects of a large snowstorm across Central and Eastern Canada, which forced some business closures. Statistics Canada estimates that the storm impacted over four times the average number of workers who lost work due to weather-related events in February over the past five years. The disruption to work resulted in some loss of earnings, which weighed on spending. Internationally, rising trade tensions cut into consumer confidence in February. The Conference Board of Canada’s analysis reveals that consumer sentiment surrounding current and future financial positions and job prospects deteriorated in February.  
• The ICS rose in March, ending the quarter at 104.8. The end of the GST/HST tax break meant higher prices for variety of products, which contributed to March’s increased ICS score. On a year-over-year basis the index in March was unchanged. Although monetary policy has created a more accommodating environment for spending — interest rates almost half what they were a year ago — the lack of growth in consumer spending is a sign that factors such as a higher unemployment rate and weakening consumer confidence are creating a drag on spending. 

Key Insights

Rate cuts are helping to support consumer spending, but trade turmoil has reignited inflationary pressures challenging progress towards the neutral rate.

The Conference Board of Canada anticipates one additional rate cut this year. In April, the Bank of Canada opted to leave rates unchanged, reflecting the renewed inflationary risk. The Conference Board of Canada expects that the U.S. tariffs on Canada will remain in effect throughout the second quarter of 2025, with inflationary pressures beginning to ease in the second half of the year.

Low Consumer and business confidence are holding back ICS growth.

Low consumer confidence tends to stifle discretionary spending, with consumers allocating a greater portion of income to debt repayments or saving. Meanwhile, low business confidence causes firms to scale back or even freeze hiring plans. Over time, weaker job creation tends to push up the unemployment rate, negatively impacting income and spending. For the ICS to improve concretely, both business and consumer confidence will need to improve. However, this is easier said than done with the trade war creating enormous uncertainty surrounding the near-term trajectory of the economy.

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Walter Bolduc

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