Canadian consumers are becoming increasingly cautious with spending at retail, a trend that’s also taking place to an extent in the promo industry.

Retail sales saw a slight uptick of just 0.2% between March and April, according to Statistics Canada, which was preceded by a 1.4% drop between February and March. Analysts say the combination of inflation plus high interest rates is putting downward pressure on consumers’ ability to spend.

Indeed, tamping down inflation is proving difficult. Despite a series of rate hikes by the Bank of Canada and what looked to be a gradual decrease since last summer, the rate hit 4.4% in April, up from 4.3% in March and more than the 4.1% analysts had expected. This is the first month-to-month increase since last June, when inflation hit 8.1%.

Among the factors affecting the high rate were mortgages and rent. Just-released data from the Bank of Canada shows that a third of mortgage borrowers are facing increases in their monthly payments, and more new homebuyers are turning to credit cards to cover expenses.

The economic situation is also negatively affecting growth in Canada’s metropolitan areas; a study by market analysis firm The Conference Board of Canada found that higher borrowing costs and ongoing inflation continue to impact growth and expansion post-COVID.

“Major cities across Canada have largely recovered from the impacts of the pandemic, but new challenges are on the horizon,” said Jane McIntyre, The Conference Board’s principal economist. “Reduced consumer confidence across most of the country, inflation and constricted labour markets will hamper growth in most cities.”

Among the areas seeing cooling demand are housing (including new construction), restaurants, hospitality, recreation, tourism and retail.

Still, some Canadian companies in promo say they have yet to see a pullback among clients. Steve Levschuk, president and CEO of Talbot Marketing (asi/341500), shared those sentiments earlier this month while reflecting on Q1 sales. Ann Baiden, CEO and founder of Innovatex Solutions (asi/231194), told ASI Media this week that her customers are still bullish, particularly when it comes to the return of in-person trade shows and conferences.

“They’re coming back with a vengeance, and everyone’s looking to refresh their signage, booths and tablecloths that haven’t been used in a few years,” Baiden says. “Clients that had paused budgets now feel the need to support employees through branded merchandise, golf tournaments and summer barbeques.”

Meanwhile, Paul Wieleba, owner of multi-line firm {WE} Promotional Advertising, says year-over-year sales are up for all the suppliers whose lines he represents. In particular, while the last couple of years were marked by high demand for brand-name items, the return of events means more giveaways. “There’s more balance,” he says. “Trade shows are back, so budget-priced handouts have made a return, while uniform sales are growing steadily. As a result, we’re seeing an average price point that might be slightly lower, but a higher volume of sales.”

“Trade shows are back so budget-priced handouts have made a return, while uniform sales are growing steadily. As a result, we’re seeing an average price point that might be slightly lower, but a higher volume of sales.” Paul Wieleba, {WE} Promotional Advertising

Wieleba says the effects of inflation are impacting some distributors and their end-buyers; he’s finding that distributors are “shopping around” more when sourcing product, and demand for lists of products on clearance has ramped up. He’s also fielding more requests for discounts and has seen some apprehension among distributors when it comes to company programs, since, as a result of inflation, suppliers can’t guarantee pricing beyond a few months.

“Customers are looking for more for less,” Wieleba says, “but there’s still significant demand for quality.”

Sergio Munoz, vice president of business development for Debco, part of Top 40 supplier HPG (asi/61966), also says there’s been a gradual decrease over the past few months in average order value and average price point as end-buyers practice more caution when purchasing. Debco continues to respond by offering retail-inspired products at a more affordable price point, according to Munoz.

“They’re more cautious about spending and they’re using their credit cards more often,” Munoz says. “We haven’t noticed a significant impact from inflation or layoffs in the sectors we serve, but we’re constantly monitoring the market and adapting our strategies accordingly. We’re optimistic for the coming months.”