Consumer spending seen slowing through 2026

Between a weaker job market, trade turmoil and a drop in population growth, Canadian consumer spending is set to slow in the months ahead, says Fitch Ratings.

In a new report, the rating agency reported that spending growth eased to just 0.2% on a quarter-over-quarter basis in the first quarter, as services spending stagnated and durable goods spending declined, partly offsetting an increase in non-durables spending.

For the full year, Fitch is forecasting consumer spending growth to slow to 2% this year — before dropping to just 0.7% in 2026: “Slower population growth will weigh on total spending through 2026.”

Fitch is also also expecting a softer labour market, and ongoing trade disruptions with the U.S. to weigh on consumer activity.

“Labour market conditions are deteriorating, particularly for export-oriented sectors, with business surveys and jobs data showing falling employment and reduced hiring intentions,” Fitch noted — adding that, “real income growth and wage gains are set to slow further,” too.

While the household savings rate is relatively strong at 5.7%, the rating agency said, “savings are concentrated among higher earners, limiting any potential boost to consumption.”

Household credit conditions, with high debt levels and increasing arrears, will also constrain spending, it noted.

“Mortgage debt and debt servicing costs remain historically high, and consumer confidence is volatile amid uncertainty over U.S. trade policy,” it said.

Indeed, rising U.S. tariffs on Canadian exports are expected to weigh on sentiment and economic activity, Fitch said.

Against that backdrop, “We forecast a mild recession in 2025, with GDP declining for two quarters,” it noted.

And, while interest rates are expected to ease further, “risks remain skewed towards fewer cuts if inflation remains elevated,” it noted.

James Langton

James is a senior reporter for Advisor.ca and its sister publication, Investment Executive. He has been reporting on regulation, securities law, industry news and more since 1994.