With interest rates and other costs remaining high, consumers are in a sour mood and Ottawa residents are no exception.
In fact, while several major cities, including Vancouver, Toronto, Montreal and Winnipeg, are seeing negative spending growth, Ottawa is trailing well behind the pack, according to the November Local Spending Tracker report from the Canadian Chamber of Commerce.
“There was a bit of a burst of spending growth (in Ottawa) in the spring, then things really turned negative,” said the chamber’s chief economist Stephen Tapp.
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Currently, Ottawa’s real spending growth per person is down 10.2 per cent. The next closest ranked city, Winnipeg, is down 6.9 per cent, with the national average down 3.8 per cent.
According to Tapp, no matter how you cut the data, Ottawa’s spending growth is well into the negative, ranked below the national average and at the bottom of the list of the 21 cities monitored by the chamber.
“Simple correlation analysis suggests consumers in places facing larger housing affordability challenges have cut their spending more,” said Tapp.
“This isn’t too surprising, given the financial strain already being felt — and that surely lies ahead — due to higher mortgage rates as the Bank of Canada attempts to bring inflation back to target.”
In July, the Bank of Canada raised interest rates, which led to a stagnation in spending growth, according to the chamber’s report. Real spending growth, adjusted for inflation, has been negative nationwide in the months since.
“We’ve seen consumer spending numbers falling back really consistently after the bank tightens policy,” said Tapp. “People are essentially just buying less stuff.”
Despite the disparity between Ottawa’s spending growth and other major cities, Tapp said he thinks the main contributing factors are largely the same.
Unaffordable housing markets, as well as high interest rates on mortgages and other borrowing, are considered among the primary causes for negative spending growth. Tapp said Canadians are tightening their purse strings to account for other costs of living and pulling back on discretionary spending on items such as travel and tourism, luxury goods and dining out.
“Not really sure there’s much of a different story happening in Ottawa. It just seems to be a bit more significant,” he said.
One unique contributor may be workforce mobility. While Tapp said Ottawa’s labour market is relatively strong, there isn’t enough movement back into the downtown core to bring food traffic to pre-pandemic levels. As a result, spending in the area is down.
“People are out of their house less and downtown less,” said Tapp. “Although for some businesses things have picked up, they aren’t where they were before the pandemic. There’s just fewer office workers working downtown.”
While the numbers may seem alarming for the city, Tapp said Ottawa is at least consistent, with spending growth stagnant for the past six months.
“We haven’t really seen things get considerably worse since the summer, but we haven’t seen it getting a lot better either,” he said. “Ottawa has been down towards the bottom of the list, though it hasn’t been last consistently.”
Despite the gloomy outlook, Tapp said the spending at the local level can fluctuate frequently, which means a positive uptick could come at any time.
“Some of those things over time will just sort of wash out,” he said. “There may be a big convention, or something like a protest, that can be good or bad for mobility, spending and the local economy.”
Unfortunately, the holidays are unlikely to give local spending a boost.
“Our expectations based on consumer sentiment and on business sentiment in Ottawa, which is pretty weak, is we wouldn’t expect there to be a very strong consumer spending season in Ottawa based on the data we’ve seen,” he said.