While consumer spending remained strong in the second quarter, it turned a corner after the Bank of Canada ended its pause on interest rate hikes, the Canadian Chamber of Commerce said.
Consumer spending will likely slow noticeably in the second half of the year as people cut back on discretionary purchases, said Chamber chief economist Stephen Tapp.
The Chamber tracks local spending using data from payments firm Moneris.
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The Chamber’s business data lab found that consumer spending saw a resurgence in April and May following a post-holiday slump.
However, after the Bank of Canada hiked its key policy rate to 4.75 per cent in June, spending started to dip, the Chamber said.
The central bank hiked its trendsetting rate again last week to five per cent.
Tapp said population growth has been supporting strong spending — while spending tracked by the Chamber is up from last year, when adjusted for inflation and population growth, real spending growth per person has actually been negative since mid-March.
This helps explain why consumer spending has remained strong even as Canadians cut back on spending to deal with higher costs, said Tapp.
