• Spring weather inspired Canadians to freshen up their homes and revamp their closets during the month of April. Core retail sales (total retail sales excluding motor vehicles) were much stronger in April, but most of the growth was driven by home-related purchases, sporting goods, and clothing ahead of warmer weather.
• Home-related spending on home furnishings, renovation materials, and garden supplies ticked materially higher for the first time in a year. Building materials accounted for one-third of the overall uptick in April spending.
• But strength in real spending (adjusted for inflation) was broad-based, with increases across almost all spending categories (with the exception of groceries, gasoline volumes, and miscellaneous goods). For the first time this year, spending on discretionary goods ramped up alongside both services and essentials.
• Spending on hotels rebounded for two-consecutive months after Canadians stayed put in the back-half of 2023 through the winter months. Restaurant spending ticked slightly higher ahead of summer patio season.
• April RBC consumer spending data marked a stronger start to Q2 than we expected. But one month does not make a trend. We are cautiously optimistic that consumer activity will improve this year- as adjustment to higher rates hits households less hard in 2024. The question is- will consumer optimism prevail into summer? Labour market headwinds have been building with the unemployment rate up one full percentage point from a year ago and layoffs rising in recent months. A ramp up of business insolvencies in Q1 alongside higher household credit delinquency rates add to these headwinds. We continue to expect consumer spending to pick up in the back half of the year once BoC cuts are underway, likely starting in June

Source: RBC Economics