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.
Less Interest Means More Holiday Shopping
- The Index of Consumer Spending (ICS) averaged 115.4 points in the fourth quarter of 2024, a small improvement of 1.1 points year-over-year.
- On a month-to-month basis, the quarter started with an improvement to 114.4 points in October (0.5 points higher than September), a jump to 117.5 points in November, and ended at 114.2 points in December.
- In the fourth quarter, the Bank of Canada announced two 50 basis points cuts bringing its policy interest rate to 3.25 per cent. In their deliberations, the Bank highlighted that there was encouraging signs that past monetary policy actions have begun to improve household consumption.
- The additional 100 basis points of cuts in the fourth quarter will further support higher household consumption especially regarding interest-sensitive purchases like durable goods. Noteworthy is that the effects of monetary policy take time to be realized and diffuse through the economy meaning past cuts will improve spending in the near term while the effects from this quarter’s cuts are expected to be felt later this year.
- Consumer price growth has moderated with the consumer price index (CPI) averaging 1.9 per cent year-over-year in the fourth quarter. Gasoline prices year-over-year fell in October and November but rose in December due to a base-year effect. Shelter price growth continues to ease with lower interest rates but remains elevated.
- A quarter-to-quarter rise in the ICS in the fourth quarter is expected given the holiday season. Year-over-year November’s ICS was slightly higher while December’s was slightly lower. This is consistent with a growing trend among consumers to shift holiday spending from December to November to take advantage of Black Friday deals.
Key Insights
Fourth quarter inflation is artificially lower.
Inflation in the final quarter of 2024 averaged lower thanks in part to December’s 1.8 per cent year-over-year inflation figure. This came in lower partially due to the federal government’s GST/HST holiday which came into effect on December 14, reducing prices for several goods and services. The tax holiday also pushed nominal spending down in the final two weeks of December, though some of this was offset by greater spending from the reduced prices. When the GST/HST is reinstated after the holiday in mid-February, inflation and total spending will see a small uptick.
The unemployment rate ticked higher, but consumers had more money to spend.
In the fourth quarter, the average unemployment rate increased to 6.6 per cent, up from 6.5 per cent in the third quarter. However, the increase was driven by labour force growth, and employment actually rose by around 155,000 jobs between September and December. The gains were enough to push retail sales up by an estimated 0.4 per cent in the quarter, with the higher total employment meaning more total money available for spending.
Looking ahead, hiring activity is expected to increase which will help support improvements in spending. In 2025, we expect disposable income to grow by 2.9 per cent and retail sales to rise 2.5 per cent, boosting the ICS.
It is unclear what impacts the Trump presidency will have on the ICS.
Looking toward the 2025 year, the ICS could see an increase through several channels. For starters, any imposition of tariffs on Canadian goods imported into the U.S. would lower the loonie’s value and drive up prices to Canadian consumers. This could lend to a higher ICS, though general weakness in the economy and consumers pivoting from U.S. goods to domestic goods would offset some of the additional price pressures. Spending could also be further restrained if the Bank of Canada pauses or reverse its rate cutting cycle to deal with higher inflation from the tariffs.
About The Conference Board of Canada:
The Conference Board of Canada is the country’s leading independent research organization. Our mission is to empower and inspire leaders to build a stronger future for all Canadians through our trusted research and unparalleled connections. Index of Consumer Spending | The Conference Board of Canada.
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