RBC Reports Consumer Spending Slowdown Amid Weak Gas and Grocery Sales

Consumer spending growth in Canada is showing signs of deceleration, according to the latest cardholder data released by Royal Bank of Canada (RBC). The slowdown is being driven by declining expenditures on gasoline and flatlining grocery purchases — two major essential categories for households.

In its recent research note, RBC observed that total consumer spending fell by 2.2% month-over-month in August, wiping out gains seen in July. Meanwhile, core retail sales growth (excluding gas and auto) was reported at 0.4% seasonally adjusted, down from 1.1% in July.

The bank also noted that the three-month moving average of consumer spending continued to soften. Much of this trend can be attributed to a persistent decline in gasoline spending, which began in the spring after the federal carbon tax was eliminated.

“The ongoing contraction in gasoline spending — continuing on a three-month average basis since the elimination of the consumer carbon tax this spring — has been a significant driver of this trend,” the note stated.

In addition to the drop in gas spending, grocery purchases have also remained stagnant since May. Overall, spending on essentials declined by 0.6% in August.

However, RBC’s data showed that other spending categories maintained positive growth, suggesting consumers are still engaging in non-essential consumption, albeit more cautiously.

Despite the slowing trends, RBC remains cautiously optimistic. “We believe Canada’s economy will resume slow, but positive, GDP growth after a Q2 decline,” the bank said. It added that resilient consumer activity is likely to offset continued weaknesses in industrial output.

This trend aligns with broader economic expectations: while inflation has eased and interest rates have plateaued, household budgets remain under pressure from high prices and uncertain job markets. As such, analysts expect consumption to continue growing at a modest pace, acting as a buffer against potential recessionary forces.