According to a new survey from Deloitte Canada, fears of a recession and pressure from inflation are leading Canadians to tighten their purse strings this holiday season. The survey reveals that the average amount Canadians plan to spend on holiday expenses has reached a five-year low of $1,347, a decrease of 11% from last year’s forecast and significantly lower than the average spend of approximately $1,700 in 2019.
Deloitte Canada partner Marty Weintraub explains that these results are not surprising, given the current economic outlook and the strain consumers have experienced due to inflationary pressures and high interest rates over the past year. The survey, conducted among over 1,000 Canadians in late August and early September, found that two-thirds of respondents are concerned about a recession, with 55% worried about upcoming rent or mortgage payment hikes and a third concerned about the cost of holiday gifts.
Weintraub anticipates a decrease in charitable giving this season, with projected spending down 40% over the holidays. However, the survey also shows that Canadians are still eager to spend on experiences, with an 11% increase in forecast spending on travel. About 26% of respondents said they plan to treat themselves to a concert, spa, trip, or other experience. On the other hand, 24% of those surveyed stated that they would delay a trip in order to afford holiday purchases.
Despite the expected decline in retail spending, Weintraub highlights the importance of context. The increase in spending on experiences and the creativity consumers are employing with their budgets demonstrate their ongoing dedication to holiday celebrations. Weintraub suggests that while consumers still wish to treat their loved ones to something special, the amount they spend will likely be lower this year.
The slowdown in consumer spending is also reflected in a separate survey released by the Bank of Canada. The central bank’s business outlook survey reveals that many businesses are anticipating a decline in sales as discretionary spending decreases amid economic uncertainty. Both surveys indicate that Canadians are opting for less expensive goods and retailers when shopping. Deloitte’s survey found that 29% of Canadians plan to shop at cheaper stores this holiday season, up from 24% last year and 20% the year before. Additionally, 71% of respondents said they would be searching for items on sale, compared to 69% in 2022 and 56% in 2021.
The Deloitte survey also uncovered a declining trust in retailers, with 73% of consumers feeling that prices are being raised unfairly, an increase from 68% last year. While Weintraub acknowledges that consumers may not fully understand the economics behind pricing decisions, their perception is what matters. Given years of elevated inflation, businesses will need to work harder to regain consumers’ trust and appeal to their limited budgets during the holiday season.
The survey further reveals that 55% of consumers are willing to pay more for products certified as sustainably produced, particularly among the 18 to 34 age group, where nearly two-thirds expressed a willingness to pay extra for sustainability. However, Weintraub urges caution, explaining that consumers may express certain values in a survey but not necessarily follow through with their purchasing decisions during tough economic times.
Despite the current low consumer budgets indicated by the Deloitte survey, Weintraub remains cautiously optimistic that holiday spending will rebound as economic prospects improve in the coming year. He hopes that this year will be an exception and that better growth numbers will be seen in the future.
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