Public finances in N.L. are a mess, but that’s not stopping people from spending

The fiscal situation in Newfoundland and Labrador is not good, with the treasury buckling under big deficits and ever-increasing public debt.

But data from Statistics Canada and the provincial government shows that’s not stopping people from spending on new vehicles, investing in homes and keeping pantries full.

Consumers spent more than $12 billion in 2024, and finance officials initially forecasted a two per cent growth in retail sales for 2025.

But the actual numbers have blown past those forecasts, with retail sales from January to October of 2025 up 4.7 per cent more than during the same period a year earlier, outstripping the national benchmark of 4.4 per cent.

“An increase from two per cent to four per cent is a really powerful message that we like to spend,” said Tom Cooper, a professor in the faculty of business administration at Memorial University in St. John’s.

In December, the new PC government updated the public on the province’s fiscal situation, with Finance Minister Craig Pardy revealing that the deficit had swelled to nearly $1 billion.

When the former liberal government introduced the budget last spring, it forecasted a deficit of $372 million.

Pardy described the spike in red ink as “deeply troubling.”

But the data shows the economy remains resilient, with Newfoundland and Labrador one of the country’s growth leaders in GDP.

Part of this growth is driven by the energy sector, with all four offshore oil fields in production for the first time since late 2023, and production volumes for last year up by nearly 20 per cent.

The province capitalized on its geographic advantage and global trading patterns and largely avoided the headwinds of Donald Trump’s trade war, according to an economic forecast by TD Bank.

What’s more, industries like mining, the fishery and oil and gas employ thousands, and most are high wage jobs.

And then there’s demographics. Newfoundland and Labrador has one of the country’s oldest populations, and many of those boomers have deep pockets.

“They’re buying those new cars, they’re buying those really cool items you can get at Costco,” said Cooper.

Another big driver in retail sales is the auto sector. Nationally, new vehicle sales were up by nearly three per cent last year, while in this province, sales accelerated by more than 10 per cent.

Just in October, the value of retail sales in the motor vehicle and parts dealers’ category spiked by 15.6 per cent.

“It has most certainly been a good year,” Alexia Russell Feltham said of the auto sector in 2025.

‘We’ve seen significant growth’

Russell Feltham is CEO of Terra Nova Auto Group, which operates dealerships in St. John’s and Grand Falls-Windsor, and is chair of the Automobile Dealers Association of Newfoundland and Labrador.

“We’ve seen significant growth year-over-year, both Newfoundland, St. John’s and our dealerships personally,” she said.

Fears that Trump’s tariffs would drive up the cost of vehicles by thousands of dollars helped fuel a sales surge, especially mid-year, said Charles Bernard, an economist with the Canadian Auto Dealers Association.

Dealer incentives and favourable interest rates also helped.

“If you look at sales numbers in Newfoundland and Labrador and in Canada from early March to almost the end of the summer, the numbers were very good,” he said.

More than 4,000 vehicles sold in May

In May, for example, there were 4,045 new vehicles sold in Newfoundland and Labrador, in a province of under 550,000 people. That’s 623 more than in May 2024. Similar patterns played out in March and April, but sales tailed off in October and November in comparison to last year.

“We’re up 100 new units and we’re up 250 used units for [2025]. So we’ve seen significant growth,” said Russell Feltham.

But all that spending comes at a big cost, and Cooper worries that many people are overextending themselves and taking on big debt. He’s urging fiscal caution.

“If you’re looking at that big ticket, I would say, does your future self really need that?” he said.

Keeping up with the Joneses

He said the old “keeping up with the Joneses” phenomenon is still a reality, and often leads to financial strain or debt.

“I think we just get better and better every year, which is not necessarily a good thing, at dealing with more debt,” he said.

However, the immediate future is uncertain. Retail sales have been cooling in recent months, the job market is slumping and the construction industry is a glaring weak spot in the province’s economy.

TD Bank forecasted in December that conditions in the job market “appear set to weaken further in the coming quarters,” and that the jobless rate will increase to around 11 per cent by the end of this year.

But in the longer term, the potential development of the Bay du Nord offshore oil field, and a new hydroelectric deal with Quebec on the Churchill River, could fuel even higher spending.

Meanwhile, at Terra Nova Motors on Kenmount Road, salesman Brian Elms boasts about the futuristic features in vehicles like the Buick Envision.

“It can do everything from detect a person on a bicycle going down a street to a fellow about to cross the road,” he said.

Vehicles are more intelligent than ever, but when it comes to spending habits, it remains to be seen whether or not residents will stay in the fast lane.

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