Lacklustre Christmas spending raises fears for Canada’s economic vitality
Consumer spending for the final three months of 2016 seems to suggest that Ontarians are becoming financially fatigued, a signal that the economy could sputter early in 2017.
The trend is similar here in Ottawa, according to local experts, who expect the economy to struggle even while the nation’s capital plays host to visitors for Canada’s 150th anniversary of Confederation.
According to statistics released this week by Canada’s largest debit and credit card payment processor, Moneris Solutions Corp., Ontarians led the country in spending between October and the end of December.
Moneris said during the threemonth holiday shopping season, Ontarians spent 6.24 per cent more than they did during the same period a year earlier. While the amount is an increase over 2015 holiday shopping totals, it falls short of the 8.3-per-cent increase in consumer spending during the 2015 shopping season, which signalled a strong start to that year.
Ontario’s increase was higher than the national average, which saw Canadians spend 4.19 per cent more on holiday shopping than they did one year ago. Still, the relatively slim increase both provincially and nationally in the face of increased costs facing consumers is sparking warnings.
“We observed increases in consumer spending throughout every quarter of 2016, but that growth declined slowly and steadily over the course of the year,” said Angela Brown, president and chief executive of Moneris.
“As we enter 2017, we expect a trend of modest growth to continue as Canadian policymakers react to a changing global landscape and broader challenges present in the Canadian economy.”
Further compounding concern is how Ontarians relied on their credit cards over the holidays. Moneris said 65.3 per cent of all spending they tracked over the holiday shopping season was done using credit cards. Only 34.7 per cent was done with debit cards.
While Ottawa-specific statistics weren’t available, Barry Nabatian, a market researcher with Shore Tanner Associates, said indicators suggest Ottawa’s consumer spending was similar to provincewide trends.
The slight increase seen in 2016 doesn’t account for higher utility costs, the rising prices of consumer goods and increased prices of other necessities, he said.
“Food prices, insurance, taxes, rents and other costs of living have gone up a lot, resulting in less disposable income and thus less expenditure on an average per capita basis,” Nabatian said. “Discount stores such as Costco, Value Village, Walmart and Winners have done well, further reducing the available dollars for mid-price, mid-quality, independent and small businesses.
“The new luxury businesses have their own markets, and therefore the middle has shrunk further.”
Nabatian said the recent closure of stores and restaurants around Ottawa, including Le Baron, Ben Moss Jewellers, Danier, Real Sports Bar and Grill and the Don Cherry’s Sports Grill franchise on West Hunt Club Road, are all signs of what residents can expect in 2017 as businesses catering to everyday, middle-class families continue to struggle.
“The reduced spending of the middle-class is the main reason for the store closures, of which there will, unfortunately, be more in 2017,” he said. “So overall, more money was spent in 2016, but primarily the discount sector benefited from it, and at the expense of the middle-type businesses.”
In its most recent report, Statistics Canada said employment in the capital was holding steady as the number of local federal government workers rose by 5,900 in December. The federal government now employs 145,100 in Ottawa, the highest total since June 2010. Other sectors aren’t performing as well.
The tech sector saw a drop of 1,700 in December from the same month last year. Finance and real estate shed 1,600 positions and workers in food services lost 1,000 jobs.
Construction held steady with 30,000 workers as several projects around town continue to fuel the industry.
However, the Canada Mortgage and Housing Corp. has long been forecasting a housing market slowdown in 2017, which could have an impact on employment in the sector once all of the city’s large legacy projects are completed. The agency expects national housing starts for 2016 to range from 181,300 units to 192,300 units, then ease to between 172,600 and 183,000 units in 2017.
Statistics Canada also produced new data Friday showing that the consumer price index, a basket of goods that the government uses to monitor inflation, increased by 1.5 per cent during the month. The jump followed a 1.2-per-cent rise in the index in November.
The Statistics Canada report also claimed that Ontarians spent about 5.7 per cent more on energy in December than they did during the same month in 2015.