How the pandemic has shifted consumer spending

By Katie Keir | July 14, 2020 | Last updated on December 6, 2023
3 min read
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© Danil Chepko / 123RF Stock Photo

Consumer spending trends in North America seem to have taken a turn for the better, according to recent data, but that’s likely not enough to provide clarity for investors and fund managers.

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“Our outlook for the consumer sector has not substantially changed, in that we remain cautious on consumer fragility, particularly among low-income consumers as the economy reopens,” said Chase Bethel, an equity analyst at CIBC Asset Management, during a late-June interview.

He’s waiting to see how consumers hold up “in the period following the wind-down of government stimulus and the end of forbearance from banks, landlords and others.”

The federal government’s emergency programs for businesses and workers were recently extended, with the wage subsidy now effective until December and two additional payment periods added to the Canada Emergency Response Benefit.

Recent reports from TD and RBC Economics showed rebounds in consumer spending in May and June after a massive drop during pandemic lockdowns in March and April. RBC’s findings, based on June credit card data, indicated a 4% spending jump compared with a year ago.

Yet, both banks highlighted that spending habits have shifted significantly, with upticks in online spending, and TD advised caution in assessing short-term trends.

“When we think about when consumer sectors will rebound in the second half of the year, a lot hinges on how one defines a rebound,” Bethel said.

Improvement from “very dismal” spending in March and April isn’t so hard. Using year-over-year comparisons, however, “it is difficult to see many consumer discretionary sectors showing growth” in the second half of this year.

The biggest positive surprise in consumer spending, both during the lockdown and since economies have started re-opening, has been in the leisure sector, Bethel said.

“Based on our channel checks and also based on public company disclosure, it appears that consumers have substituted airline and cruise-based travel vacations for areas like power sports,” he said, a shift that’s reflected in sales of ATVs, boats and RVs.

“Such strong demand was not anticipated so soon,” he added, but “the corollary here is that valuations for equities that we look at in the leisure space have had a strong run, and valuations have made the risk-reward unattractive in our view.”

He’s also cautious on any businesses tied to travel and large gatherings. Montreal-based Gildan Activewear, for example, makes promotional T-shirts and apparel for events such as marathons and concerts, which aren’t happening during the pandemic, he says.

More generally, demand for casual apparel is growing with many still working from home.

For now, Bethel’s more optimistic about discretionary sector groups like fast-food restaurants, automotive aftermarket retailers, dollar stores and other discounters, and home improvement stores.

“While most middle- to high-income consumers have fared well through this pandemic, we expect stress on the finances of low-income consumers,” he said. “We see the health of low-income consumers being particularly important, given that this group has a higher propensity to spend or consume relative to other consumer groups.”

While Bethel doesn’t believe the first wave of Covid-19 is “definitively completed,” he also doesn’t forecast a second global lockdown with a second wave.

“We are mostly watching for geographic hot spots where the virus spread may be reoccurring at a higher rate versus the rest of the country or population,” he said.

When choosing stocks, he’ll continue to focus on strong balance sheets and liquidity, he said, and on names that are aligned with the “online acceleration” trend spurred by lockdowns and working from home.

This article is part of the AdvisorToGo program, powered by CIBC. It was written without input from the sponsor.

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Katie Keir

Katie is special projects editor for and has worked with the team since 2010. In 2012, she was named Best New Journalist by the Canadian Business Media Awards. Reach her at