Canadians’ spending habits this holiday season are likely to be influenced by how well they believe the economy is performing, according to a new report from PwC Canada.
Based on this week’s developments in North American free trade, shoppers may be more inclined to open their wallets once stores begin stringing up their Christmas lights.
“Those who think the economy will perform better over the next six months are likely to spend more, but only 16% expect it to,” stated PwC Canada’s 2018 Holiday Outlook, released October 3.
“What’s more, 28% said trade protectionism could affect how they spend this season (up from 6% in 2017).”
Data from the annual report was prepared before the U.S.-Mexico-Canada Agreement — a replacement for NAFTA — was announced September 30.
USMCA hasn’t undone protectionist tariffs imposed by the U.S. on Canadian steel and aluminum (Canada responded earlier this year with its own retaliatory tariffs).
But the tentative deal provides Mexico and Canada with assurances that automobile tariffs that the Americans had been threatening were off the table.
Derek Burleton, deputy chief economist at TD Economics, said in a note to investors the deal provides the Canadian economy with a “sigh of relief.”
“General reaction has been swiftly positive. By removing a significant cloud of uncertainty around trade, it is very likely to be growth positive, especially for Canada and Mexico,” he said.
So if Canadians are feeling better about the economy, what do they plan to spend their money on?
Travel accounts for the largest chunk of holiday spending (46%), followed by gifts (41%) and entertainment (13%).
Overall, spending is expected to increase 3.7% to $1,563 on average this year compared with last year.
Millennial moms, meanwhile, plan to spend $2,264 on average — more than any other group surveyed.
But based on gender, men will outspend women on average: $1,752 to $1,385.
However, retail analyst and Retail Insider Media editor-in-chief Craig Patterson told Business in Vancouver many in the retail industry were concerned about what the USMCA deal could mean for shopping habits within Canada.
The new agreement raises the de minimis rate — the dollar limit Canadians can purchase from foreign e-commerce sites without paying duty — from $20 to $150.
“They’re not looking to really enforce higher levels beyond $150 to any great degree … this could really hit Canadian retailers hard, especially e-commerce retailers, ” Patterson said.
