Inflation, Gifts and Guilt: The Economics of Canada’s Holiday Economy
Every December, Canada undergoes a massive transformation: parking lots fill, holiday markets boom, and packages pile up on doorsteps. The holiday season is both a ritual and an economic machine, turning sentiment into economic growth. Despite inflation, rising costs of living, and household debt, Canadians spent $69.6 billion in November 2024, 5.8 percent more than in November and December 2023 and November and December 2024. (Statistics Canada, 2025). The holiday economy is a distinct characteristic of Canadian culture, providing a Q4 sales boost and symbolizing a time of unity, connection, and joy; yet, what drives this cycle of extravagance?
A primary influencing factor of holiday spending is present bias, the tendency to prioritize the present over the future (O’Donoghue & Rabin, 1999). From a behavioural perspective, Canadians often ignore January’s costs to fund December’s festivities, with a survey finding that 68% of households expected to overspend, justifying it as a seasonal practice (Retail Council of Canada, 2024). But what truly influences overspending? Loss aversion plays a substantial role, as Kahneman and Tversky (1979) found that losses have roughly twice the impact of gains. Retailers, as a result, capitalize on these trends by using marketing that stirs these sentiments, phrases such as “limited stock” or “final sales” pressure buyers into purchasing items to avoid feeling they missed out on substantial savings. Social and societal tendencies and expectations additionally influence overspending. Western perspectives tend to frame gift-giving as a form of generosity, intimacy, and affection. Retailers thus adjust their campaigns to target this cognitive bias and focus on the emotional side of spending. Sales of expensive products are often seen as highly affectionate gifts or quick shipping guarantees that reduce stress, made to seemingly convenience individuals. This is evident in December 2024, when Canada Post saw a record number of parcel shipments and, as a result, urged customers to “ship early,” framing the shipping service as a scarce product (Canada Post, 2024). Scarcity plays a substantial role both economically and psychologically, encouraging individuals to purchase items sooner and in greater quantities due to the fear that items will be unavailable or unable to be delivered to loved ones if they wait too long.
The holiday market, however, provides benefits in November and December 2025, as over 200,000 people were hired across retail, warehousing, and transportation-related jobs, thereby reducing unemployment (Government of Canada, 2025). These benefits, however, are short-lived, as consumer spending and employment trends return to pre-season levels after the season ends. This short-term boost in aggregate demand without sustained productivity growth can be depicted as a holiday multiplier. However, with the advent of online shopping, fewer and fewer positions are being opened. Indeed reported that only 1.2 percent of job postings in November 2024 were seasonal, down from 1.5 percent in 2019 (Indeed Hiring Lab, 2024). Subsequently, the holiday economy both stimulates national growth and destabilizes household finances. This is best seen in Canada, where Canadians, who face stagnant wages and high living costs, still spend more during inflationary periods, while retailers rely on this cyclical consumption to balance their annual budgets.
This remains a complex challenge, as economic relief often fails to assist households. Inflation, at 1.8% in December 2024, alongside a temporary sales tax, actually encouraged spending, thereby returning Canadians to their status quo (Reuters, 2025). Consumers noted that this was sparked by a fear of prices rising again, which led to increased spending, thereby inverting initial economic assumptions (Bank of Canada, 2025). Behavioral economics reframes these principles not as irrationality but as predictability. Emotional spending around Christmas is often anchored in social signalling, as individuals utilize it to express identity and affection through conspicuous consumption (Waldfogel, 1993). A well-wrapped high-cost present often communicates care and acts as a substitute for affection and intimacy.
The effects of Canadian consumerism during the holiday season are not simply national, but instead tie into a larger narrative of one of North America’s most well-known cultural creations. Black Friday, for example, a once-exclusive American practice, now symbolizes increased spending globally. Streaming platforms, advertising campaigns, and retailers worldwide leverage the shared sentiment to boost and synchronize demand worldwide. This transformation directly shifts cultural tradition into global macroeconomic trends. When Canadians spend during the holiday season, manufacturers in China, India, and Bangladesh feel the change before the first snowfall. The World Trade Organization estimates that Q4 North American retail trends raise East Asian manufacturing roughly 3% in peak years (WTO, 2024).
Domestically, however, for policymakers, the question remains on how to harness this surge without causing instability. While seasonal employment remains beneficial, it often causes irregular hours and volatile income. Thus, there remains a need for a systematic reform, including the implementation of standardized scheduling practices to ease financial stresses without compromising business flexibility. Similarly, increased support of “buy-now-pay-later” credit or methods could protect households from post-holiday, January debt spirals (Bank of Canada, 2024). Moreover, minimal financial literacy campaigns held each November may be able to redirect behaviour toward more altruistic forms of generosity rather than impulsive purchases.
The holiday economy is a direct mirror of Canada’s shifting, mixed economic reality, with prosperity built on borrowed time. It directly celebrates connection and unity, but it relies on overspending; it provides work and fuels economic growth, but leaves January with falling employment and economic contractions. As orders pile up globally, the surge of holiday purchasing reverberates from stores in Canada to factories in Asia. While lights and decorations are swiftly removed, bills and receipts remain, and behind every single gift, a challenge remains in balancing joy and judgment, as well as the wish to give and the cost of living. In the end, Canadian and broader Western holiday economics are less about exchanged goods and instead are about the performance of the action. Behavioural tendencies become fiscal patterns yearly as the country’s present generosity is always met with a later challenge.
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