CIBC’s Andrew Grantham sees a calm surface and stressed households underneath
Canada’s consumer spending profile looks far more even across income groups than the United States. However, that apparent stability masks growing stress for stretched households and more cautious high earners, according to fresh analysis from CIBC economist Andrew Grantham.
A “K-shaped” recovery typically describes an economy where wealthier households pull ahead while lower-income groups fall behind. In the US, Grantham said, high-income earners drive most of the growth in consumer spending compared with middle- and lower-income earners.
By contrast, he noted that Canadian spending across all income groups has seen similar increases over the past few years, a pattern he linked to lower earners running down savings rather than enjoying stronger income growth.
Savings-fuelled spending raises red flags
Grantham warned that individuals have been dipping into savings to fuel some of the extra spending, a trend he argued could not continue indefinitely without hitting demand.
“This won’t be able to last forever, and there is a risk that spending among lower/middle income groups will slow if the improvement seen recently within the labour market doesn’t persist,” he said.
That concern tracked with the Bank of Canada’s own consumer expectations survey, which showed a higher perceived likelihood of missing a debt payment and weak overall spending plans despite some optimism around job‑hopping and hiring prospects. High prices, economic uncertainty and elevated housing costs continue to be the main brakes on household outlays, the central bank reported.
Mortgage‑sensitive high earners stay cautious
Grantham said the divergence with the US also reflects the fact that Canadian high‑income households do not enjoy the same level of wealth gains and are more exposed to interest rate risk, with a greater proportion still holding mortgages — some of which continue to reset at higher rates.
A Bank of Canada analysis showed roughly 60% of mortgages renewing in 2025–26 are expected to see higher payments, with five‑year fixed‑rate borrowers facing average jumps in the mid‑teens. Moreover, surveys point to widespread renewal anxiety and cutbacks in discretionary spending as households sought to manage those higher costs.
CIBC also suggests the economy is unlikely to grow fast enough to justify rate hikes before 2027.
For lenders and brokers, the absence of a dramatic K‑shape in headline spending figures does not mean households were in the clear. The combination of eroded savings at the bottom, mortgage‑sensitive caution at the top, and a long pipeline of renewals at higher rates point to a market where advice, product flexibility and early engagement at renewal would matter more than ever.
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