Overview
- Key Insights from Customer Transactions
- COVID-19, the Canadian Economy and Scotiabank’s Transactions Data
- Business Transactions Data Details
- Retail Transactions Data Details
- Other High-Frequency Indicators of Activity
- Caveats
1. Key Insights from Canadian Customer Transactions
This presentation is part of the weekly series intended to draw insights about the state of the Canadian economy from the flow of Scotiabank’s retail and non-retail transactions data.
Key takeaways from the payments data in this week’s publication:
Updated to January 9th, y/y growth in business sector transactions has remained relatively stable through late December, but the tentative signs of restrictions started to show in early January:
Growth in the wholesale and retail incoming payment flow slowed at the start of 2021, in line with stricter public health measures announced in several provinces. The financial industry saw a strong rise in y/y growth in incoming payments at the end of December, before a sharp slowdown in January.
In addition, growth in overall outgoing payments slowed somewhat in the first week of 2021, with rent payments suffering a particularly sharp y/y decline.
A consistent picture is seen in consumer transactions, updated through January 11th, which ended up below year-ago levels in late December and early January. However, over the past few days the daily spending was closer to the levels seen a year ago, pulling up the average spending over the past 2 weeks and helping to reduce the rate of y/y contraction.
Overall average growth in December slowed somewhat compared to previous months, but the deceleration in late December and around the New Year was relatively sharp and coincided with restrictions implemented in various provinces during the Boxing Day shopping season. Spending declined significantly in Ontario, Quebec and Alberta, but other provinces saw varying degrees of growth deceleration.
Growth in clothing, restaurants, entertainment, hardware and travel spending slowed or declined relative to last year. In contrast, online spending picked up as consumers turned to alternatives to in-person shopping.
2. COVID-19 and the Canadian Economy: Scotiabank Transactions Data
We present data on retail and non-retail transactions, which capture distinct but related aspects of economic activity in Canada.
The data comprises actual observed daily transactions going through debit or credit card payment networks in the retail space, and automated funds transfers (AFTs) in the non-retail space.
The transactions are anonymized and aggregated to protect the privacy of Scotiabank’s clients.
The AFT payments show bill payments to/from companies in Canada.
Incoming payments can be associated with company revenue, and outgoing payments can be associated with costs.
Debit and credit card payments can be used to measure the evolution of retail spending at various types of establishments.
The transactions can serve as a measure of economy-wide retail spending, and of the extent to which households are resuming pre-COVID levels of activity.
Note that the use of electronic payments has increased because of COVID-19, so comparisons to year-ago levels can be misleading. These data are best used to observe directional movements rather than to make specific assessments on the level of activity.
In the current circumstances, comparing the dollar volumes of transactions in the current year to its level of a year ago should help track growth through the re-opening phase.
3. Business Transactions Data: Payments Slowing in Late December/Early January
Updated to January 9th, y/y growth in business sector transactions has remained relatively stable through late December, but the tentative signs of restrictions started to show in early January (chart 1):
Growth in incoming payments in the wholesale and retail industries slowed at the start of 2021, while the financial industry saw a strong rise in y/y growth in incoming payments at the end of December, before a sharp slowdown in January (charts 2-6).
Automated Funds Transfers (AFT) are used for:
rent and mortgage payments;
payroll deposits; and
other bills.
3. Business Transactions Data: Retail and Wholesale Payments Ease Further
3. Business Transactions Data: Manufacturing/Transportation – No Sign of Recovery
3. Business Transactions Data: Growth in Bill Payments Weaker in the New Year
Growth in overall outgoing payments slowed somewhat in the first week of 2021, with rent payments suffering a particularly sharp y/y decline (Chart 7 and 8).
Payroll deposits have been running above last year’s levels in early January, despite the slowdown seen in other areas of business and household payments (Chart 9).
3. Business Transactions Data: Rent Payments Decline Abruptly
4. Retail Transactions Data: Y/Y Decline During Holidays, Slight Improvement Recently
Consumer transactions updated through January 11th ended up below year-ago levels in late December and around New Year holidays. However, over the past few days the daily spending was closer to the levels seen a year ago, which helped to stabilize and reduce the rate of y/y contraction (Chart 10).
Average y/y growth in December slowed somewhat compared to previous months, but after Christmas holidays an overall y/y contraction was seen in both debit and credit card spending.
More recently, spending stabilized and began to improve slowly compared to the levels of a year ago.
4. Retail Transactions Data: Card Spending Weaker in Ontario/Quebec/Alberta/Manitoba
Spending around holidays declined the most in provinces that imposed stricter lockdown measures at the end of December, with Ontario, Quebec, Manitoba and Alberta driving overall spending down (Charts 11-14).
Growth in the Atlantic provinces continued to outperform the national average in the last few weeks.
4. Retail Transactions Data: Most Sectors Deeper In the Negative Territory
Overall y/y decline in spending can be seen across most of the categories, but especially those that were most negatively impacted by the pandemic (Chart 15).
4. Retail Transactions Data: Healthcare/Automotive Spending Relatively Stable
Growth in clothing, restaurants, entertainment, hardware and travel spending slowed or declined relative to last year (Chart 16).
The only two sectors that saw relatively stable spending growth were healthcare and automotive. The latter suggests that spending in that sector (which includes gas stations and repair shops) remained resilient through late December and early-January. In contrast, separate industry data shows that sales of motor vehicles declined for the second month in December.
4. Retail Transactions Data: Online Spending Picks Up During the Holidays
Online spending picked up at the end of 2020 as consumers turned to alternatives to in-person shopping during the post-Christmas shopping season (Chart 17).
5. Other High-Frequency Indicators Of Activity
Charts 18-31 Google Searches, Various Keywords, Dining and Transportation Data
6. Caveats
Note that the mapping from the volume of transactions to measures of economic activity (e.g. GDP) is imperfect, and so care must be taken when drawing the implications.
The data is observed at daily frequency and embeds different types of seasonal patterns.
For retail payments, the volume and types of payments are different depending on the day of the week and the season.
For non-retail payments, both the day of the week and the season are important. In addition, some payments are tied to the calendar date (e.g. rent payments are made on the first day of each month), some payments have a bi-weekly schedule, etc.
To smooth out most of the day-to-day seasonality we use a 14-day moving average of the dollar volume of transactions, taking a y/y% change to remove any remaining seasonal patterns related to the calendar date.
In addition to seasonality, there is normal payment volatility related to the random nature of the transactions process and the impact of regional and economy-wide events (weather, labour strikes, etc.).
The volatility of this nature may or may not be related to economic activity as measured by GDP and so, as mentioned above, care must be taken in drawing inference.
For business transactions, which are inherently more lumpy compared to retail spending, data towards the end of the sample can be revised as some AFT payments are recorded with a lag. As a result we exclude the last few days of data of business transactions only.
Nikita Perevalov* (Scotiabank Economics)
Taha Jaffer, Jason Liang (Data Science and Analytics)
Roland Merbis, Artur Motruk (Customer Insights & Analytics)
* Director of Economic Forecasting, 437.775.5137 nikita.perevalov@scotiabank.com
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