With grim predictions for holiday spending, Canada is in for a different kind of Christmas, for sure, but one that’s showing positive signs for its economic recovery.
The boarded-up storefronts across Canada and much of the rest of the world suggest that Christmas may be a dour one this year.
Recent research from PriceWaterhouseCoopers (PwC) pointed to evidence that Canadians were planning to spend 31% less than usual this holiday season. Yet the good news for the economy is that the reality looks quite different.
Not only do real-time figures show people, on average, devoting as much money to shopping as in years past, but with a sharp rise in savings for some and an evident increase in hardship for many others, some Canadians are giving more to charities that directly help those in need.
Whereas Christmas spending is traditionally divided between gifts and travel, the many travel restrictions still in place around the world mean most winter vacations are off the table this year.
The other big shift is away from services, such as meals out, movies, and grooming.
And while some retailers are still suffering, especially those who depend on foot traffic, data from various sources suggests savings elsewhere are helping to boost total spending on goods, including food.
It used to be that retail sales statistics were only available months after the shopping season had passed and data had been collected from individual retailers, but the widespread use of credit and debit cards now provides an accurate and detailed running tally.
Data supplied by RBC’s Consumer Spending Tracker shows that following a slump during the initial lockdown, consumer spending is now up from a year ago. Nevertheless, a closer look at the numbers shows large gaps between winners and losers.
Grocery spending continues to eclipse other sectors. Household goods and electronics are outpacing gifts and clothing. Travel spending has plunged and continues to fall. The sharp decline in gasoline spending has slowed but is still falling.
The flipside is that many consumers who are employed continue to earn more than they spend. That makes this recession strange compared to those in the past, where a lack of retail activity was due to people not having money to spend.
On the other hand, for retailers who have not been able to move their sales online, some of whom do 80% of their trade during the busy Christmas shopping season, the business they lose now could be gone for good. Not only that, but things could get worse for retailers if expanding COVID-19 case loads in places where shops have remained open scare customers away.
There is some good news, however. Normally, during recessions, charity is down. But because of the savings hoard, some people have more capacity to give, not less. While demand for food bank services has soared because of the pandemic, cash donations from ordinary Canadians and businesses to food banks are three times higher than what they would collect in a normal year.
A different kind of Christmas, for sure…
A COVID-19 type of holiday
PwC reports that a whopping 86% of Canadian consumers expect to spend the same or less this holiday season, with deep cuts in travel spending. When asked how the pandemic will affect their personal spending capabilities for the holiday season, 57% of respondents said it’s had a negative or slightly negative impact. Also, 85% Canadian consumers plan to use their credit card at some point during the holiday season. Among those, 79% of them aren’t worried about debt.
Similar to last year, the biggest proportion of holiday spending among respondents as a whole will be on family members. But people will be spending a lot less on themselves (-49%). In 2020, Canadians will spend $630 on gifts (vs. $647 in 2019) , $308 on travel (vs. $743 in 2019), and $166 (vs. $204 in 2019) on entertainment.
Among the generations, Millennials are set to spend the most. When looking at overall holiday shopping, Gen Z (17-24 years old) and Millennials (25-38 years old) plan to spend CA$1,216 on average, compared to CA$1,058 for Gen X (39-53 years old) and Baby Boomers (54-73 years old). This younger group is also much more likely to travel during the holidays.
With the current US/Canada border closed, the number of respondents who said they’d consider in-store cross-border shopping is down drastically from last year. But at the same time, PwC sees an increase in online cross-border shopping—a phenomenon they refer to as the rise of the global shopper.