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Household Spending in Canada Could Gain Momentum Next Year, CIBC Says

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Easing pressures from food inflation, mortgage costs and gasoline prices next year should give Canadian households more room to spend, according to CIBC Capital Markets in a Tuesday note.

After years of squeezed disposable incomes and restrained discretionary spending, this could support a modest recovery in household consumption, said the bank.

"Looking ahead to 2027, the trend does appear to be in favour of less strain on household incomes, leaving a little more room for discretionary spending," wrote CIBC Senior Economists Katherine Judge and Andrew Grantham in the note

Per-capita spending may be healthier than headline figures suggest in Canada, according to CIBC. Excluding non-permanent residents from the population base, the gap relative to the pre-pandemic trend narrows to around 0.7%, compared with 2.7% on the headline measure.

Looking ahead, easing inflation and lower gasoline prices should support real disposable incomes, while the drag from higher mortgage renewals is expected to ease by the second half of 2027, added the bank. Stabilizing home prices could further strengthen the wealth effect.

Risks remain, but easing household pressures should support stronger discretionary spending in 2027, said CIBC.

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