Wealthy Consumers' Spending Slows Down, But Markets Remain Optimistic

The global economy is in good shape due to various factors such as tech spending, fiscal stimulus, a manufacturing upturn, and a spendy consumer. However, this consumer base is bifurcated into wealthier and less wealthy individuals, with the latter struggling.

A tracker of higher-end consumer spending remains decent, including cosmetic, sit-down restaurant, and luxury brand spending. This data measures same-store sales or overall sales on a year-over-year basis to mitigate seasonality factors.

Combining this data with card spending in discretionary categories shows a trend of falling consumer spending, possibly due to higher energy prices taking a bite. The Canadian consumer is also struggling, with retail sales flatlining since early Q1 2025 and more discretionary categories following suit.

The Canadian economy has posted two consecutive quarters of negative GDP, but this is largely attributed to trade and inventory volatility rather than a recession. Investment trends are concerning, while rising exports provide some hope. The market remains optimistic, with the S&P/TSX advancing despite economic concerns.