Fears of a recession and pressure from inflation have Canadians feeling less like Santa and more like Scrooge heading into the holidays, a new survey from Deloitte Canada shows.
The consultancy firm’s annual holiday spending outlook shows the average amount Canadians are planning to spend over the holidays this year has reached a five-year low of $1,347.
That’s down 11 per cent from 2022’s spending forecast and well short of the roughly $1,700 average spend seen back in 2019 when the survey launched, says Deloitte Canada partner Marty Weintraub.
The results are “not surprising,” Weintraub tells Global News, as the economic outlook dampens, and consumers feel frayed after battling inflationary pressures and high interest rates for well over a year.
The survey of more than 1,000 Canadians conducted in late August and early September showed roughly two-thirds of respondents are concerned about a recession. More than half (55 per cent) are worried about upcoming hikes to their rent or mortgage payments, while a third are worried about paying for gifts over the holidays.
“All of these things are weighing on the minds of the consumer this holiday season,” Weintraub says.
“This year we’re just basically going to see a hunkering down. So we’re going to spend less on gifts and also give fewer gifts to fewer people.”
Charitable giving is also expected to take a hit this season, with projected spending down 40 per cent over the holidays.
While gift-giving is expected to take a hit, Canadians are meanwhile still keen to spend on experiences, with an 11 per cent jump in forecast spending on travel. Some 26 per cent said they plan to treat themselves to a concert, spa, trip or other experience.
On the opposite end of the spectrum, 24 per cent of those surveyed said they’d postpone a trip to afford holiday purchases.
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While travel is the only “light in the tunnel” for consumer spending this season, Weintraub notes the context is important, as year-over-year upticks in travel spend are coming as the industry is still climbing back from pandemic-era lows.
Though retail spending is expected to take a hit, the boosts to experiential spending and the ways Canadians are getting creative with their budgets show consumers are continuing to prioritize holiday celebrations, Weintraub argues.
“Consumers still want to go out and have some fun in the holiday season. They want to treat their friends and their loved ones to something special,” he says.
“That has not changed, but how much they spend … that’s absolutely going to be lower this year.”
Consumers feeling ‘gouged’ by retailers heading into holidays
Businesses are already bracing for the slowdown, according to a separate survey released this week.
The Bank of Canada’s business outlook survey released Monday showed many businesses are expecting a slowing or outright decline in sales as discretionary spending slows amid economic uncertainty.
Both the central bank and Deloitte surveys show Canadians are trading down for less expensive goods and shops to fill their shopping carts.
Deloitte’s survey found 29 per cent of Canadians plan to shop at less expensive stores over the holidays, up from 24 per cent in 2022 and 20 per cent in 2021. The proportion of Canadians who said they’ll be hunting for on-sale items was up to 71 per cent in the latest survey, compared with 69 per cent and 56 per cent in the past two years.
Canadians might not just be shopping around for the best deal, but also for a retailer that they trust, Deloitte found.
Some 73 per cent of consumers said they felt that retailers are “raising prices unfairly” — a figure that’s up from 68 per cent last year.
The Bank of Canada’s business surveys, meanwhile, indicated that firms’ price hikes will remain larger and more frequent than they were before the pandemic.
Weintraub says that consumers are feeling “gouged” after years of elevated inflation, and it doesn’t matter if retailers are or aren’t abusing their pricing power; businesses will have to work harder to earn consumers’ trust — and their scarce dollars — this holiday season.
“Put yourself in the consumer’s shoes: they don’t always understand the economics that go all the way up the supply chain,” he says. “They see the shelf price that the retailer is selling that product at, and that’s what they’re reacting to.
“It’s the perception that counts and that’s what’s driving that concern.”
According to Deloitte’s survey, 55 per cent of consumers might be willing to spend a little bit more for a product certified as being sustainably produced. Those values were particularly prominent among those aged 18 to 34, with almost two-thirds saying they’d pay more for a more sustainable option.
Weintraub cautions that just because consumers say one thing in a poll doesn’t mean they’ll follow through at the checkout. He says that in times of economic distress, there’s a “gap” between what well-meaning consumers will say and what they will do.
“Time will tell whether or not that’s actually going to manifest itself in sales,” he says.
With consumer budgets seemingly at an all-time low for the Deloitte survey, Weintraub is cautiously optimistic that holiday spending will return when economic prospects improve in the year ahead.
“I’m hoping this one year will be an exception, that we can get back to some better growth numbers next year,” he says.
— with files from Global News’ Nivrita Ganguly
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