06:45 AM EDT, 09/16/2024 (MT Newswires) -- Sparse though it was, last week brought forward several second-tier data releases in Canada, noted TD.

The national balance sheet and financial flow accounts for Q2 showed that Canadian household net worth grew by C$42.4 billion. That was a relatively modest 0.3% quarter-on-quarter increase, but it built on top of a "healthy" 3.6% gain in Q1, said the bnak. Gains in United States equities and deposits more than offset declines in real estate and Canadian equities.

Household wealth growth is expected to accelerate by the end of the current quarter, barring any major disruptions in equity markets, which are tracking in the black both in the US and Canada, pointed out TD.

House prices are also rising, and are expected to finish this quarter strong. Although some regional housing markets, particularly the Greater Toronto Area condo market, face headwinds due to supply-demand imbalances and still-high mortgage rates.

Despite wealth gains, the wealth effect on consumer spending remains muted, as most wealth is concentrated in the top 20% of households who typically have a lower propensity to consume, stated the bank.

In addition, adjusted for inflation and population growth, per capita household wealth has fallen nearly 15% from its 2021 peak. Since then, real per capita spending has contracted in seven of the last 11 quarters, underscoring that on aggregate, economic growth has been largely population-driven rather than productivity-led.

TD's internal data shows that while consumer spending on services is still chugging along, the pace is "noticeably" slowing. Services, which had been outpacing goods since 2021, are now tracking much closer to goods spending. Canadians may still have a nest egg -- whether in real estate or investments -- but they are hesitant to spend freely. With debt servicing costs still taking up 15 cents of every disposable income dollar, it's no surprise that consumer enthusiasm is tempered.

With services inflation excluding shelter still elevated, a continued slowdown in services spending helps reduce the risk of renewed upward pressure on services prices, added the bank. This provides peace of mind for the Bank of Canada in sticking with its course.

TD expects Canada's central bank to continue cutting its policy rate in October, with another reduction in December, bringing the rate down to 3.75% by year-end. TD will update its economic forecast on Tuesday.