Canadians feel ‘cautious’ about spending as holidays near, Bank of Canada says

The Bank of Canada expects Canadians will be “cautious” about spending money in the second half of the year, a prediction that comes shortly after others have warned consumers could be poised to pullback on holiday spending this year.

The central bank released its summary of deliberations on Wednesday.

The document sums up the talks between governors of the Bank of Canada that led to the most recent decision to cut interest rates again.

In October, the bank delivered another cut to interest rates by 25 basis points, which lowered its overnight rate to 2.25 per cent.

Consumer spending in Canada was largely resilient this year and both housing starts and resales increased since the spring, the bank said.

However, the bank also said it expects “slower per person consumption growth, coupled with slower population growth, would mean modest overall consumption growth in the second half of the year.”

While financial conditions are favourable to spending, Canadians are worried about losing their jobs, the bank added.

“While accommodative financial conditions would support household spending going forward, people who are worried about their jobs would likely be cautious in their spending.”

This comes as hiring has remained weak in the Canadian economy, the bank noted.

The sectors of the economy directly targeted by U.S. tariffs, such as automobiles, steel, aluminum and lumber, have been hardest hit.

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“Lower demand from the United States for Canadian goods and services was affecting the rest of the economy as well,” the bank said, noting the wider impact of the U.S. trade policy uncertainty on the Canadian economy. The “weakness in the labour market could persist.”

A report by PwC released last month showed, on average, Canadians said they were planning to spend 10 per cent less than they did a year ago, with 81 per cent of respondents saying they expended to spend less.

Some retailers have noted customers are looking for value, discounts and lower prices overall.

Dollarama has seen its stock surge in recent years, with the company highlighting in its quarterly earnings report that “consumables” were driving the sales growth.

This means some customers may be skipping visits to the grocery store in favour of a visit to retailers like Dollarama that potentially offer lower prices for food and other items.

Most small business owners, particularly in the retail and hospitality sectors, are feeling the pinch from the economic uncertainty. Three in four (76 per cent) of Canadian small businesses in the retail and hospitality sectors said they’re not planning to hire seasonal staff for the holidays, according to a poll by Canadian fintech firm Merchant Growth.