A slowing Canadian economy will result in consumer spending falling to its lowest level in a decade this year, according to a new report from the National Bank of Canada.

Economists at the bank expect real consumption growth — which is calculated once the impact of inflation is stripped out — to hit 1.3 per cent in 2019, which would be the lowest since 2009 when it fell to 0.2 per cent amid the global financial crisis.

A combination of a softening housing market resulting in Canadians feeling less wealthy, pressure from higher interest rates and a low household savings rate will result in consumers spending less, according to National Bank.

"Part of the loss of momentum can be attributed to a softening housing market, which is not only restraining resales and home prices, but also hurting consumption spending via fading housing wealth effects," Krishen Rangasamy, senior economist at National Bank, says in the report.

Real retail spending in the fourth quarter "is on track for its worst quarterly performance since 2009," Rangasamy says.

As a sign of things to come, retail sales data for November from Statistics Canada last month fell more than expected, by 0.9 per cent.

Added to that, housing data from the country's most expensive market, Vancouver, on Monday showed home sales in January fell to the lowest in a decade — plunging nearly 40 per cent.

Higher interest rates are also hurting the ability of households to spend, according to Rangasamy. The Bank of Canada has raised rates five times since mid-2017.

"Note that personal bankruptcies shot up last quarter in all of the country's four largest provinces," Rangasamy said. "Considering elevated household debt and a low savings rate, it's difficult to imagine a scenario other than smaller and smaller contributions to GDP [gross domestic product] growth from consumption spending going forward."

Overall, National Bank predicts real consumption grew by 2.2 per cent last year, but it will slow to 1.3 per cent this year, and slow further to 1.2 per cent in 2020.

'Not all bleak'

One of the actions that could interrupt the "concerning trend" in consumer spending, according to Rangasamy, is fiscal stimulus from the federal government to spur activity in the economy.

"Fiscal relief from the federal government, a distinct possibility given that we're in an election year, could temporarily give a boost to households."

A strong jobs market could also boost spending even though jobs will be created at a slower pace than last year, according to the bank.

Rangasamy said it's not all "bleak" for consumers. "The Bank of Canada's latest Business Outlook Survey, indeed, suggested firms were still willing to expand head count to address shortages in some areas."

Jobs data on Friday is expected to show the economy added 5,000 jobs in January, according to a Bloomberg poll of economists. About 9,300 jobs were created in December, but that was later revised to 7,800 jobs, according to Statistics Canada.

However, the jobs data is known to be volatile. Economists at Toronto-Dominion Bank are expecting the economy last month will have added 15,000 jobs, while economists at the Bank of Montreal and National Bank forecast a loss of 5,000 jobs.