The prospect of Canadian households driving the economic recovery by spending their stockpile of savings accumulated during the pandemic is a key upside risk to the recovery, but consumers are so far proving cautious, a report from CIBC World Markets says.

While disposable income has surged in both Canada and the U.S. during the pandemic — largely thanks to government support measures — consumer spending by households in Canada has lagged the U.S.

More restrictive lockdowns in Canada have likely limited spending on services, but CIBC said spending on goods in Canada has also trailed the U.S., where restrictions on services spending was reallocated to buying goods. In Canada there’s less evidence of the same shift, the report noted.

The result is that Canadian households have accumulated savings and are armed to boost spending further in the months ahead. However, the report suggested that boost may not materialize.

In fact, consumer caution could continue, it said, which would temper the recovery.

“Cautious spending behaviour to date relative to the U.S., even in areas not directly impacted by pandemic restrictions, combined with increased mortgage debt and potentially a desire not to return to the sparse savings seen pre-pandemic suggests that the recovery in consumer spending here will continue to lag that seen stateside,” the report said.

As a result, the Canadian economy may not get as much of a boost from its consumer side as the U.S. will in 2022 and 2023.

This also runs against the current market expectation that the Bank of Canada will move ahead of the U.S Federal Reserve on rate hikes, CIBC noted.