Forget gym equipment, those high grocery bills and possibly even housing — it’s travel, restaurants, haircuts and clothing that Canadians are ready to spend on when businesses reopen

As businesses across Canada prepare to open their doors in the coming weeks, experts predict a “strong rebound” in retail and restaurant sales over the summer, and a cooling-down of the real estate market once international travel resumes.

Sri Thanabalasingam, senior economist with TD, said Canada saw an “economic pullback” in April — Statistics Canada predicted a GDP fall of 0.8 per cent — which he said isn’t a surprise given the COVID-19 shutdowns across the country.

May is expected to remain more or less the same, said Thanabalasingam: “We might see some positive growth, but nothing substantial.”

But June will likely be a different story, he said. With many provinces planning to loosen restrictions, and more and more Canadians getting their first or even second vaccine dose, customers are likely to start spending again in places they haven’t for a while.

In a TD Economics note to clients Tuesday, Thanabalasingam predicted a shift in economic activity away from housing and durable goods such as vehicles and electronics toward the services sector.

“These conditions will set the stage for a strong rebound in demand,” he wrote. “This could fuel extraordinary growth this summer.”

But RBC senior economist Robert Hogue said a shift in consumer spending this summer isn’t likely to put a significant dent in the current housing market.

“At the margin we might see a little bit of shift in interest, but it’s unlikely on its own to be a catalyst for a turn … in the housing market,” said Hogue.

That’s because there are other factors influencing housing, he said, such as low interest rates on mortgages.

However, a shift in retail spending this summer could signal bigger changes later on for real estate, according to Hogue.

He thinks an accumulation of factors — the ever-increasing price of housing, the return of international travel — as life gets closer to “normal” will cause the housing market to cool down later in 2021 or early in 2022.

“If we’re talking haircuts and a night out at a restaurant, I don’t think this is taking that much money away from potentially being dedicated toward housing,” said Hogue. “But, you know, a $ 10-15,000 dollar trip … might be a bit more of a factor.”

Currently there is a lot of pent-up demand for high-contact businesses and services, said Thanabalasingam, such as salons and restaurants as well as domestic tourism.

“There’s a lot of different avenues where we could see demand really return,” he said.

Retail analyst Lisa Hutcheson, a managing partner at consulting firm J.C. Williams Group, said over the past year we’ve seen a number of trends in retail, from the spike in grocery sales at the beginning of the pandemic to the shortage of at-home gym equipment as people realized they would be home for the long haul. There was also a rise in personal care spending, she added, as people decided to take their haircuts and highlights into their own hands.

As the economy reopens, Hutcheson believes people will continue to spend money on anything related to the outdoors, such as gardening equipment. She, too, thinks there is a lot of pent-up demand from consumers.

Thanabalasingam noted that many Canadians have saved more money during the pandemic than they might have otherwise, and are ready to spend.

In addition to services and restaurants, clothing retail has been struggling a little, said Thanabalasingam, but he predicts that will go up as well as people venture outside.

“We’re already seeing some indications of that evidence specifically in the States,” he said. “They’re further ahead in the reopening process … we can look to the States to get some hints of how things may evolve in Canada.”

Hutcheson agreed.

Loading…

Loading…Loading…Loading…Loading…Loading…

She said most retail categories are doing relatively well in comparison to 2019 (comparing to 2020 doesn’t give a realistic picture) except for clothing and shoes.

But in the United States, clothing and shoes did well in April compared to earlier months in 2021, she said.

“We’re kind of getting a sense that clothing will have a good rebound.”

JOIN THE CONVERSATION

Conversations are opinions of our readers and are subject to the Code of Conduct. The Star does not endorse these opinions.

TORONTO STAR