Economic uncertainty taking the splurge out of holiday spending, report says

While many Edmontonians may be welcoming the chance to do in-person holiday shopping at stores and malls, they likely won’t be able to splurge as much as they might have hoped.

Across income brackets, consumers have seen their buying power shrink, states the 2022 holiday retail outlook, released in October by the consulting firm Deloitte. This causes consumers to hunt for deals and discounts and look for cheaper products, says the Spending less, connecting more report.

The report said Canadians will also simply spend less on their holidays this year due to higher food prices, inflation worries and overall concern for the economy. 

Marty Weintraub, Deloitte’s national retail leader, expects the holiday season to be challenging for retailers but said some will fare better than others. 

“We’ll have some retailers that are enjoying a pretty buoyant holiday season — especially in  popular brands or categories that are very big for gift-giving,” he said. 

“Some of the other businesses that don’t have very clear value propositions, or there’s a lot of competition, or it’s a commodity — I think that’s where they’re gonna have a bigger challenge.” 

Canadians are becoming increasingly concerned about their financial situations and what the future portends, especially given the prospect of a recession, Weintraub said. 

“Whether it happens or not, how good or bad it gets, we don’t know yet. But all you have to do is hear those signals as a shopper, a consumer, while you’re out in the mall, or while you’re clicking away on a website, and that does change your behaviour.”

Ups and downs

A recession is generally defined as a period of business contraction where economic activity declines. Financial experts, including former Bank of Canada and Bank of England governor Mark Carney, say Canada likely will head into a recession next year. 

Marc Desormeaux, principal economist at Desjardins, agreed with Weintraub’s assessment of consumer uncertainty during this holiday season. 

“There are risks to the upside and to the downside,” he said. 

The lifting of public health restrictions has changed the shopping experience for people. The labour markets are still solid and various government transfers are contributing to household incomes, he said. 

On the downside, inflation is eating away at disposable incomes. 

Canada’s central bank has raised its rate seven times this year, with the most recent being a Dec. 7 hike to 4.25 per cent.

Desormeaux expects the Canadian economy to slow down in the near future, as the effects of rate hikes start taking full effect and potentially leading Canada into a recession.

Busy days at Alberta’s biggest mall

However, Desormeaux expects Alberta to weather the possible recession reasonably well. 

“Alberta looks like it will be relatively resilient to the downturn in the Canadian economy with support from things like still high oil prices, capital projects going ahead and relatively little exposure to the housing market.” 

This is what Danielle Woo, the general manager of West Edmonton Mall, is counting on. 

“Obviously, inflation is on everybody’s mind, but as far as the traffic in the mall, it has been probably even busier than years past,” she said. 

“Hopefully, we can sustain what we have now, with the strong economy and just seeing what the shopping habits are in the mall right now,  it’s feeling very positive.”

She attributes the popularity of West Edmonton Mall to its mix of entertainment venues, luxury stores and local independent retailers. 

However, the mall faces tough competition from electronic commerce. 

According to Deloitte’s report, more people than ever are shopping at Amazon and other major online merchants.

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