Canadians’ purchasing power is still high even amid mortgage rate increases

The latest report by RBC Economics shows that in spite of the central bank’s overnight rate increase by 4.25% during the previous year, the influence of this change hasn’t revealed itself fully in a decrease of Canadians’ discretionary spending.

At the end of January, the 28-day average spending among cardholding Canadians reached 30.37%, which is higher than before January 2021. In addition to it, the number was significantly higher than the 24.6% level reported in December 2022.

RBC says that although grocery purchases were down, travel spending remained strong, exceeding the results seen before January 2022 by 14%.

“Higher debt servicing costs and lower real wages have yet to cause a decline in discretionary spending, but we still believe these factors will reduce household purchasing power,” – RBC noted.

According to a survey of Canadian employers at the end of 2022, consumers will probably face a 4.2% hike in the national average salary this year. However, organizations will have to deal with sky-rocketing inflation, recession threats, and high-interest rates.

The poll conducted by Eckler Ltd. shows that the largest increases in average wages are expected in British Columbia, Ontario, and Quebec. In terms of industry, the technology segment will show the strongest hike of 5.4%. Meanwhile, the smallest gains are expected in the education, health care, agriculture, and hospitality segments.