Canadians have saved more in the past year than in 2019 and are keen to spend on experiences
After a year of restrictions and uncertainty, Canadians are understandably keen to get back to normal, but consumer spending could be anything but normal.
With a build-up of savings estimated in the region of $100bn+ thanks to reduced spending opportunities (and in the case of commuting, necessities) since the start of the pandemic, a sizeable chunk of excess cash will be spent as lockdowns ease.
According to CIBC Economics’ Benjamin Tal and Katherine Judge, it could mean a desperately-needed inflow of cash for the industries hardest hit by COVID.
In a client note, the economists suggest that recreation, culture, leisure, and accommodations could be in line for a “sharp rebound” in spending in 2021.
This is based on around $100 billion of savings sitting in bank accounts that was not there pre-crisis with those in the top quintile of incomes accounting for the large bulk of this. Those in the second highest quintile have also saved more, with savings rates having declined for the rest.
Given that the data shows that the income groups who have boosted their savings in the past year accounted for 57% of spending on ‘experiences’ based industries in 2019, it’s not a stretch to imagine that they will spend a significant amount of their excess cash on this too.
The economists make a conservative assumption of $20 billion of the excess cash being spent on those services that reopen as restrictions are lifted.
A recent CIBC poll found that travel, investments, savings, paying off debt, and spoiling themselves and/or family were top of mind for Canadians once the pandemic subsides.
