Canada, U.S. divergence on K-shaped consumer spending cause for concern: CIBC

A person carries bags after shopping at the McArthurGlen Designer Outlet on Boxing Day in Richmond, B.C.. THE CANADIAN PRESS/Ethan Cairns

TORONTO — CIBC Capital Markets says Canada's economy is seeing less of a K-shaped pattern in consumer spending than in the U.S., and while that might appear to be good news, it could actually point to larger issues.

Andrew Grantham, senior economist at CIBC, said in a note to clients that the U.S. economy is seeing high-income earners drive most of the growth in consumer spending compared with middle- and lower-income earners. On a chart, that forms a K-shaped pattern where one group's spending goes up while another's heads down.

In the U.S., a big reason the term is popping up is that it helps explain an unusually muddy and convoluted period for the U.S. economy. Growth appears solid, yet hiring is sluggish and the unemployment rate has ticked up. Overall, consumer spending is still rising, but Americans are less confident.

In Canada, Grantham said spending across all income groups has seen similar increases over the past few years, indicating lower-income households could be dipping into savings to support spending.

"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," Grantham said.

From September to December of last year, Statistics Canada data shows the economy added a whopping roughly 190,000 jobs despite widespread trade uncertainty throughout the year.

Earlier this month, StatCan said the unemployment rate rose to 6.8 per cent in December as more people looked for work — a sign that improved labour market conditions could be leading to more optimism among job seekers.

Grantham said the divergence between consumer spending patterns in Canada and the U.S. may not be surprising given that Canada's high-income earners don't have the same degree of wealth and income compared to their U.S. counterparts.

The trend could be a "timing issue," he said, as gains in the Canadian stock market have lagged the U.S. by a number of years. Trade uncertainty could also help explain the more conservative approach, he said.

"But it could also reflect the fact that high-income households in Canada are more interest rate sensitive than their American counterparts, with a greater proportion still holding mortgages — some of which continue to reset at higher rates," he said.

The Bank of Canada's next interest rate decision is set for Wednesday, where it's widely expected the central bank will leave rates unchanged at 2.25 per cent.

Grantham said new data on income and spending, scheduled to be released this week, may change the narrative.

The Bank of Canada will offer its latest quarterly economic outlook on Wednesday, along with its latest interest rate decision.

On Thursday, Statistics Canada is set to release figures for the third quarter on income, consumption, savings and wealth across Canadian households.

"Without seeing a pick up in spending among higher income households, stronger income growth in lower brackets, or historic revisions, it’s hard to envision that the economy will grow enough in 2026 to necessitate interest rate hikes before the end of the year," Grantham said.

Last week, the Bank of Canada released its survey of consumer expectations for the fourth quarter of last year.

The survey showed consumer spending plans continue to be weak. High prices, economic uncertainty and the cost of housing remain the biggest factors constraining household spending.

This report by The Canadian Press was first published Jan. 26, 2026.

— With files from The Associated Press.

Daniel Johnson, The Canadian Press