OTTAWA (Reuters) – Canada’s newly revamped cash handout to families ahead of the start of a fresh school year could spur retail sales during a period of weak economic growth and high consumer debt.
The Canada Child Benefit gives eligible families an annual benefit of up to $6,400 for each child under 6 years old, and up to $5,400 for each child between 6 and 17.
Dana Calder in North River, Nova Scotia plans to use her C$148 monthly check to let her two daughters, 4 and 14, splurge on purchases beyond the C$300 she has budgeted for, such as a new coat or pair of shoes.
“That always goes right to the kids,” said Calder, 42, who runs a couponing blog.
The benefit replaces a similar measure under the previous Conservative government as well as other tax benefits. The government says eligible families will see an average increase of almost C$2,300.
The money likely will help retailers such as Wal-Mart Stores Inc <WMT.N> and Dollarama Inc <DOL.TO> more than higher-end clothing and supplies retailers as the benefit is aimed at lower- and middle-income families.
“Those checks will definitely be a nice offset to the economic doldrums that has settled across the country this summer,” said Todd Hirsch, chief economist at ATB Financial.
Hirsch said that if not for the benefit, he would have expected lower back-to-school sales this year.
Consumer spending is important for reviving growth in Canada, where the economy has been stunted by the Alberta wildfires and low oil prices.
The child benefit is the first tangible effect of the Liberal government’s plan to spend to boost the economy. The government estimates families will get C$23 billion in the 2016-2017 benefityear.
Wal-Mart Canada said it expects Canadians to spend an average of C$500 on back-to-school items.
That, and the child benefit, should help retail sales maintain the strength they have seen this year, economists said. Karen Sterling, vice president of marketing for Giant Tiger, said she expects parents will spend at least a portion of their checks on school supplies and clothing.
Ottawa resident Jennifer Hersey, 40, is receiving C$180. She plans to spend her usual C$500 on back-to-school items for her two daughters, 12 and 8, and put the extra money toward art lessons for her eldest daughter.
With household debt at record highs compared to income, debt counselors recommend frugality.
“I’d like to hope people will find restraint and take advantage of discount stores and opportunities where they can get a bargain,” said Laurie Campbell, chief executive of Credit Canada Debt Solutions.
Adambare De Alwis plans to do just that. De Alwis, 50, expects to spend C$100 to C$200 on back-to-school purchases, saving at places like Wal-Mart. He plans to use the extra money for a savings account for his two children.
© 2016 Thomson Reuters