Here’s how Canadians are adjusting to the oil shock: spending more

Nine West, a shoe retailer, is the latest Canadian store operator to file for bankruptcy amid flagging sales.
Stores specializing in shoes and women's accessories were "big winners" in the first three months of the year. Spending rose solidly on "non-essentials," payment processor Moneris says. Sean Gallup/Getty Images

What oil shock? Spending on dining out, women’s shoes and accessories rose strongly in the first three months of the year, new data published Tuesday shows, as shoppers broadly continued to treat themselves. The report comes, however, as consumer confidence looks to have taken a tumble this month, according to separate data.

Moneris, the largest processor of debit and credit card payments in Canada, said Canadians spent 10.9 per cent more at fast-food restaurants and 7.8 per cent at bars and pubs in January through March compared to the same three-month span last year.

Sales at women’s shoe and accessory stores jumped 9.3 and 7.3 per cent respectively. Apparel sales for men and women also climbed.

“Spending in these categories suggests that consumers feel confident enough to continue to spend on non-essentials,” Angela Brown, head of the payment processor said.

Total spending across Moneris’ network of 350,000 or so stores increased 5.8 per cent, it said. The gain builds on a 3.8 per cent increase in the final three months of 2014 – as oil prices were descending to $50 a barrel (U.S.).

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“Spending remained strong after the holiday season, with notable increases in the retail and restaurant categories,” Brown said.

Bigger debts

Statistics Canada, the federal agency responsible for compiling data used by the government and others, will release retail sales data for March on May 22.

The agency’s last report, published April 17 on retail spending for February, showed a sharp rebound after two months of declines – drops fueled by lower gasoline prices, experts say.

Many economists have been anticipating a slowdown in consumer spending for the past year or more as Canadian households confront record-high personal debt levels. But, the collapse in the price of oil since last fall—and its negative effects on the economy—has done little to slow the curb spending, experts say.

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StatsCan said on March 12 household debt levels touched a new high in the final quarter of 2014 as borrowing outpaced income growth. “For the third consecutive quarter, disposable income increased at a slower rate than household credit market debt,” the agency said.

The closely watched debt-to-income ratio — which measures how much debt Canadians collectively owe versus how much income we collectively take home — reached a new high of 163.3 per cent.

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“In other words, households held roughly $1.63 of credit market debt for every dollar of disposable income in the fourth quarter,” StatsCan said. The previous reading was 162.7 per cent, registered in the early fall.

Confidence wanes

The confidence to continue spending appears though to be petering out.

The Conference Board of Canada’s monthly pulse-taking on consumer sentiment shows “confidence deteriorated in most regions in April,” the researcher said Tuesday.

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Consumers across the country were “less willing” to make a major purchase this month, the board said, having grown “more pessimistic about their current and future financial situations.”

Cooling Alberta

Alberta, the epicentre of the country’s energy sector and subsequent slowdown, saw the biggest decline, with the Conference Board’s Index of Consumer Confidence for the region diving 27.2 points. That compares to the 13.6 point fall nationally.

Spending in the oil-rich province rose the least among Canada’s big provincial economies to start the year, up 3.9 per cent. Moneris noted the decline in oil prices “coincided with Alberta’s lower-than-average [spending] growth in the first quarter.”

The month’s survey was conducted between March 30 and April 9, conducted with 3,000 online respondents.