The back-to-school shopping season is set to be more competitive for retailers this year as economic weakness prompts families to hunt for the best deals, according to a new report from Scotia Economics.

The report’s author, Aron Gampel, deputy chief economist at Scotiabank, does not expect the 2009 back-to-school shopping season to break records. While the recession’s grip may be lessening, Gampel said the confidence-dampening drag of the contraction in overall activity over the past year is still working its way through the economy.

“The retail environment may well prove more competitive than in recent years as cost-conscious families look to stretch their purchasing power through more comparative shopping,” he said. “Many Canadians households are likely to remain cautious spenders until the recovery broadens, improving business confidence triggers a revival in job hiring, and debt burdens become more manageable.”

But the report noted that spending on school-related goods and services is typically more stable than discretionary spending, even during economic downturns.

“At a time when consumer spending has clearly downshifted over the turn of the year because of the recession’s intensifying impact, Canadians continued to increase their spending on education,” said Gampel. “The gap may well narrow, but education-related expenditures should retain their comparatively stronger growth performance in the future.”

In addition, as economic conditions improve, ultra-low borrowing costs and deeply discounted prices are beginning to prompt households to increase spending.

Education-related expenditures by Canadians have been on an upward trend in recent years, according to the report. It points to Statistic Canada’s National Income and Expenditure Accounts data, which shows that the value of personal expenditures in the ‘education & cultural services’ category posted a record 1.5% share of total consumption in the second quarter of 2009. This represents an increase of more than 50% from the early 1990s, when Canadians began to allocate more of their discretionary spending on education and education-related products and services.

Tuition is by far the largest education expense annually, with the average household spending just less than three-quarters of their education dollars on attending fee-based schools, of which over 80% represents the costs of attending post-secondary institutions.

According to the report, demographic forces are at play, with the number of students attending both public and private schools steadily on the rise.

In addition, in the current environment, reduced job opportunities may be keeping more students in school and prompting employed individuals to improve their skills.