Warmer weather has failed to spur consumer spending in the second quarter, according to one economist.
Carrie Freestone, an economist at RBC, said in a report Thursday that real spending on consumer goods fell on a per capita basis in the second quarter. The report said the pullback marks the first decline in spending since the third quarter of last year and Freestone does not expect spending to increase in the near term.
“Warm weather did not entice Canadian consumers to spend earlier in the summer. A jump in spending on discretionary goods and services in April reversed in May and June as price-sensitive consumers tightened their belts,” the report said.
Freestone added that despite an initial 25 basis point interest rate cut from the Bank of Canada in June, interest rates remain elevated and are weighing on homeowners. As a result, the report said it will “take time for the impact of BoC (Bank of Canada) cuts to ease consumer pain.”
According to the report, retail sales fell into negative territory during the second quarter despite strength earlier in the year. Auto sales “were softer in the back half” of the second quarter, due partly to software outages, but are not expected to rebound in the short term, the report said.
The report also highlighted that spending on essential items like gas and groceries also fell in June.
“Fewer Canadians renovated their homes this year, largely reflective of a sluggish housing sector as the typically hot spring housing market remained stagnant,” Freestone said.
Other sectors like food services and hotel spending also saw weaker spending, the report said.