Canadian consumers have been resilient during the pandemic, with spending during the third wave holding above 2019 levels. Anthony Okolie speaks to Sri Thanabalasingam, Senior Economist, TD Bank, about what the latest transactions data tells us about spending during the fourth wave.
- Sri, in your latest report, you talk about how the Canadian economy has bounced back faster than expected by looking at TD debit and credit card transactions during the pandemic. Now, before we get into the details of the report, can you tell us a little bit about this data that you're using to help gauge Canadians' spending patterns?
- Sure, Tony. So it's a TD debit and credit card spending. We have it across products as well as provinces. So it's a very rich data set. And by being able to tap into these data points, we're able to get a better understanding of Canadian spending habits through the pandemic.
- OK, so how have Canadian spending patterns changed over the course of the pandemic?
- It's been very interesting. So during the first wave when the pandemic first struck, we had a plummet in spending across goods and services. But then when we moved into the second wave of the virus, we saw a significant improvement in goods where goods spending levels were above where it was in 2019 but then the spending on services was still quite a bit below.
And then moving into the third wave, we saw goods remain robust, spending on some other services move above 2019 levels but spending on high touch services, so these are your restaurant, dining, recreation, entertainment, spending on these services were still significantly below what they were prior to the pandemic.
- How did government restrictions or higher COVID infection rates impact where we spent our money?
- Yeah, so because, as I had mentioned, it's a very rich data set, we were able to run some quantitative analysis. And what we found there is that restrictions are what really mattered in terms of lowering spending through the pandemic, specifically in those high touch services areas.
In terms of goods, other than what we saw at the beginning of the pandemic, it really didn't seem like the dynamics of the health crisis really impacted goods spending. Goods spending continue to be robust as I had mentioned through the various waves. But on high tech services, every time there were restrictions, spending fell. And it really didn't matter so much whether what was going on with cases, it mattered when governments imposed these public health restrictions.
- OK. So more importantly, as we move into the fourth wave, what is the latest TD debit and credit transactions data indicating about our spending patterns?
- So far it's suggesting that consumer spending has held up through to the end of September. If you dig through a little bit, you do see some substitution and spending away from some of the higher type services back towards goods, but it's still too early to say anything conclusive on that front. But on the whole, consumer spending has been robust so far through to the end of September.
- And what are some potential risks to our spending activity going forward?
- Well, the biggest risk is delta and how delta spreads and whether governments will react to delta by imposing restrictions. Because if they do, then we could see a drop in spending in some of these high touch services areas, which recovered significantly through the summer.
And this time around, maybe good spending can't pick up the slack for any drop in spending in these high touch areas, because spending on goods has been so robust so there might be less demand this time around than there were through the pandemic as a whole. So we could see a fair bit of weakness in consumer spending. But as I said, right now, consumer spending continues to be robust so far through the third-- so far through the fourth wave.
- Sri, thank you very much for your insights.