Royal Bank of Canada (RBC) economists Rachel Battaglia and Abbey Xu report that Canadian cardholder spending improved modestly in February, even as consumers continued to reduce discretionary goods purchases. Their core retail sales measure on a three‑month average stayed slightly negative but improved from January, with discretionary services and essentials offsetting weakness in goods and travel-related categories showing resilience.

Card data point to soft improvement

"RBC Canadian cardholder spending showed modest improvement in February despite consumers continuing to cut back on discretionary goods spending."

"Our core retail sales measure on a three-month average remained negative at -0.1%, but marked an improvement from -0.3% (seasonally adjusted), indicating the decline eased in February after weather-related disruptions and post-holiday fatigue weighed on spending in January."

"February’s contraction came entirely from discretionary goods—clothing and related retail segments was among the weakest performers."

"Weakness in discretionary goods spending was partially offset by spending growth in discretionary services and essentials. Travel, entertainment and art posted the strongest gains on a three-month average, pointing to continued resilience in experience-related spending."

"We expect higher oil prices will drive up purchases at gas stations. The impact on other essentials and discretionary spending is less clear as it will depend on how consumers allocate their remaining income, and the extent to which they tap into their savings."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)