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Economic News

Canada: Retail Sales Rose in December and Finish 2023 in Positive Territory

Maëlle Boulais-Préseault
Economist
February 22, 2024

Highlights

  • Canadian retail sales increased 0.9% m/m in December, after a decline in November. This was slightly above Statistics Canada’s earlier flash estimate (0.8%). The table below summarizes key data points.
  • The advance in December resulted in an increase of 1.0% in the fourth quarter for nominal retail sales. In volume terms, retail sales rose by 1.3% in Q4.  
  • In 2023, retail sales were up 2.2% from 2022, led by higher sales at motor vehicle and parts dealers. Real retail sales rose 2.3% over the year.
  • Once again, motor vehicle and parts dealers led the gain in December. Sales in this category advanced 1.9%, for a fourth consecutive monthly gain. Gasoline sales were also up 0.9% in the final month of 2023, driven by solid increase in volumes.
  • Core retail sales—which exclude gasoline and autos—were also up (0.8%) in December, led by stronger purchases at general merchandise retailers and food and beverage retailers.
  • Retail sales increased in eight provinces in December 2023, led by Ontario (1.3%) and British Columbia (1.5%). Sales were much weaker in Quebec (+0,2%), with the public sector strike likely a factor behind muted spending.
  • With a slight increase in retail prices over December, volumes increased 0.8% following the previous month’s decline (graph).
  • Statistics Canada’s flash estimate for January nominal retail sales points to a 0.4% decline.

Implications

Today’s release did not come as a major surprise, as retail sales were expected to be higher in December. However, preliminary data for January points to slower household spending, which is not particularly good news, especially when population growth is taken into account. We do expect more weakness in the following months as slack is building in the job market and as mortgage renewals lead households to tighten their belts further. While strong population growth is one factor behind the overall increase in retail sales in 2023, further easing of supply chain issues and higher inventories also supported sales’ increases, especially for motor vehicle and parts dealers. We still expect the latter effect to peak in the months ahead and contribute to softer motor vehicle purchases and inflationary pressures.

Today’s retail data did not move our Q4 real GDP growth tracking. We still expect it to be around 0.5% (q/q annualized). It reinforces our expectation that the Bank of Canada will begin cutting interest rates by mid-2024.

NOTE TO READERS: The letters k, M and B are used in texts, graphs and tables to refer to thousands, millions and billions respectively. IMPORTANT: This document is based on public information and may under no circumstances be used or construed as a commitment by Desjardins Group. While the information provided has been determined on the basis of data obtained from sources that are deemed to be reliable, Desjardins Group in no way warrants that the information is accurate or complete. The document is provided solely for information purposes and does not constitute an offer or solicitation for purchase or sale. Desjardins Group takes no responsibility for the consequences of any decision whatsoever made on the basis of the data contained herein and does not hereby undertake to provide any advice, notably in the area of investment services. Data on prices and margins is provided for information purposes and may be modified at any time based on such factors as market conditions. The past performances and projections expressed herein are no guarantee of future performance. Unless otherwise indicated, the opinions and forecasts contained herein are those of the document’s authors and do not represent the opinions of any other person or the official position of Desjardins Group.