Economists at Royal Bank of Canada say that as trade tensions have brought Canadian consumer confidence to its lowest point ever in March, figures highlight that spending hasn’t declined to that same level.
RBC Economists’ Rachel Battaglia and Abbey Xu said in a report Wednesday that the Conference Board of Canada’s Index of Consumer Confidence dropped 32 per cent from the period between January and March. The decline came alongside an unfolding trade war between Canada and the U.S.
“Consumer spending appears to have remained relatively resilient compared to the plunge in confidence measures over February and March, but escalating international trade uncertainty, including the potential for another round of significant tariff hikes in April, could add downward pressure on spending in the months ahead,” the report said.
On April 2, U.S. President Donald Trump is expected to bring about sweeping new reciprocal tariffs, coupled with previously delayed tariffs on Canadian and Mexican goods.
RBC card transactions in February experienced a 0.2 per cent drop in seasonally adjusted spending on retail goods, excluding autos, which was consistent with advanced estimates form Statistics Canada, that show retail sales falling 0.4 per cent in February.
The report also notes the end of the GST/HST tax holiday on Feb. 15 influenced the decline in purchases.
“Consumers had less incentive to spend after the tax holiday ended,” the report said.
“Categories covered by the tax break saw sharper declines after Feb. 15th compared to the same period in 2023 and 2024—even after controlling for the Family Day long weekend (and week-long February school breaks in Alberta and Saskatchewan).”
Consumer spending on discretionary goods fell in February, the economist noted, while spending on discretionary services and essentials were mostly unchanged compared to January.
“Sales at restaurants edged higher—broadly consistent with data from OpenTable showing restaurant bookings still running 20 per cent above year-ago levels into late March,” the economists said in the report,” the report said.
On a regional scale, the economists said spending had the sharpest declines in the Prairies and Atlantic provinces, where slowing population growth “is weighing on overall activity.”
In contrast, Ontario has seen stronger figures, spurred partly by the distribution of $200 stimulus cheques.
