Have Canadian shoppers hit their spending limit?

Household spending growth ended 2015 at its slowest clip since the last recession.
Household spending growth ended 2015 at its slowest clip since the last recession. Credit/THE CANADIAN PRESS

February might serve as the peak for a record run in car sales, some say, while shopping at malls dropped off a cliff in December and may well struggle to recover. All told, we consumers are spending at our slowest clip since the last major recession.

Households are looking increasingly spent, many experts have begun to suggest, and a ceiling on spending growth has perhaps been hit (see chart below).

“You can’t really blame consumers as they’ve held up growth for some time and were the key driver of Canada’s post-recession [economy],” BMO economist Benjamin Reitzes said in research note Wednesday.

How much longer we can drive the bus is a pressing question.

Household debt levels are at scary-high levels in some quarters (though only worryingly high in others), while economic conditions are trending strongly in the other direction. It’s all adding up to the beginnings of a potentially big pullback among consumers, experts hint.

Story continues below advertisement

“With low oil still weighing on the economy, wages under pressure in oil-producing regions, and weak employment growth, don’t expect consumers to ramp up spending meaningfully any time soon,” Reitzes said.

The BMO economist (and many others) are hoping something “takes the lead” in steering the economy. The trouble is, nothing has really materialized meaningfully yet.

MORE: Worried about Canada’s economy? Its ‘saviour’ just showed up

“Exports have shown signs of gaining steam,” Reitzes noted, but there are plenty of doubts about whether the low dollar will trigger the kind of industrial rebound many are banking on.

“Housing needs to cool with consumption, and, government stimulus will help but is just a temporary solution,” Reitzes noted. “There’s little doubt the outlook is challenging.”

Below shows the year-over-year change in household spending since the last recession in 2009. Growth has been on a firm downswing for the past year, but hit its post-recession low of 1.4 per cent in the latest three-month stretch.

Story continues below advertisement

Sponsored content