Canadians with extra spending cash right now might find they can score deals on clothing, some discretionary items and higher-ticket purchases as experts say retailers are fighting harder for consumers’ dollars.
February’s inflation report released Tuesday shows that not only is the pace of price hikes cooling across a range of household expenses, but some products are even seeing costs decline year over year, offering consumers much-needed relief in some categories.
The clothing and footwear component of Statistics Canada’s consumer price index saw a 4.2 per cent decline year over year last month, steeper than the 1.3 per cent drop seen in January. The section including household furnishings also saw annual price declines accelerate in February.
Shelly Kaushik, economist with BMO, said in a note to clients on Wednesday that “it’s clear prices for discretionary goods are falling” in Canada.
She highlighted that jewelry prices saw the biggest drop on record in non-seasonally adjusted terms last month. While she noted that an increase in the supply of lab-grown diamonds or alternative stones could have driven prices lower for sweethearts shopping over Valentine’s Day, the simpler explanation is that the Bank of Canada’s interest rate hikes are working well to tamp down price pressures in this area.
“Consumers are pulling back on non-essential items amid elevated rates, pushing the prices of those items down. Monetary policy in action,” she said.
Retail analyst Bruce Winder tells Global News the softening economy is indeed hampering consumer spending demand, which is forcing many retailers to drop prices to make sales.
“There is discounting that’s happening right now, because retail is all about supply and demand,” he says.
Discretionary items like jewelry and clothing and higher-ticket durable goods like electronics, furniture and appliances are “softer right now” because higher interest rates are forcing households to spend more on shelter costs, Winder says.
While food inflation cooled significantly in February, the cumulative impact of price hikes over the past few years means grocery bills are still eating up a big chunk of Canadians’ budgets, he adds.
“It’s still expensive out there. So consumers have had to make trade-offs,” he says.
And retailers are taking notice of their cash-strapped customers.
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