RBC reported that Canadian cardholder spending rose modestly in March, with overall activity continuing to stabilise while discretionary goods stayed weak. Higher petrol prices linked to geopolitical tensions lifted spending at fuel stations and supported other essential purchases.
Excluding petrol, spending still increased in March, but more slowly than in February. On a three-month average, spending growth edged lower, mainly due to a pullback in January, while February and March improved.
RBC’s core retail sales measure rose 0.3% on a three-month average, up from -0.1% on a seasonally adjusted basis. The report described this as a gradual improvement since the start of the year.
This pattern of gradual spending stabilization suggests the Canadian economy is not strong enough for the Bank of Canada to consider rate hikes. We anticipate the central bank will remain on hold, which could dampen overall market volatility in the coming weeks. Traders might consider strategies that profit from a range-bound market, like selling short-dated strangles on broad Canadian index ETFs.
With March 2026 inflation data due tomorrow from Statistics Canada, we are watching closely for signs of persistent price pressures. Similar to what we saw earlier this year, the March figure may tick up slightly to around 2.9%, driven by the energy prices mentioned. This stickiness in inflation, combined with slow growth, complicates the path for interest rate cuts and supports positions in interest rate futures that bet on rates staying higher for a little longer.
The report’s emphasis on geopolitical tensions driving fuel costs is a key signal for the energy sector. With crude oil prices currently holding firm around $85 per barrel for WTI, continued uncertainty in the Middle East suggests bullish call options on Canadian energy producers could offer upside. This is a very different dynamic from the demand-side concerns we were navigating throughout much of 2025.
The ongoing weakness in discretionary goods spending points to continued pressure on non-essential retailers. This contrasts with the stability seen in consumer staples and confirms that households are still feeling the pinch from the high interest rates we saw in 2025. We could express this view by buying put options on specific retail sector ETFs that are heavily weighted towards discretionary items like apparel or home furnishings.
