- Florence Jean-Jacobs
Principal Economist
Economic News
Canada: Retail Sales Enter Q4 on a Strong Footing
November 22, 2024
Highlights
- Retails sales increased by 0.4% in September, in line with Statistics Canada’s flash estimate. The table below summarizes key data points.
- As expected, nominal sales at gasoline stations and fuel vendors declined (-2.3%) in September, driven by lower prices.
- After two strong monthly advances, sales at motor vehicle and parts dealers edged down in September (-0.7%), with both new and used car dealerships experiencing drops.
- Core sales, which exclude gasoline and motor vehicles, posted solid growth of 1.4%—the highest monthly advance since February 2022. This was driven by strength at food and beverage retailers (3.0%), as well as advances at building material and garden equipment suppliers (3.0%). Only clothing and accessories sales contracted among core retail categories.
- Retail sales were up in five provinces, with above-average increases in Alberta (2.3%) and Quebec (0.6%). In contrast, Ontario saw retails sales edge 0.1% lower—the eighth decline in the last nine months.
- Q3 retail sales grew by a solid 3.5% annualized, following declines in Q1 and Q2.
- Real retail sales posted a third consecutive monthly advance in September, with volumes rising 0.8% (graph). On an annualized basis, Q3 volumes grew by a hefty 5.2%.
- Consumer purchases are looking up for October, with Statistics Canada’s flash estimate pointing to a hefty 0.7% monthly increase. Given that goods prices were 0.1% lower in October (on a seasonally adjusted basis), the increase appears to have been driven entirely by continued strength in volumes.
Implications
Today’s release is positive news for the Canadian economy. September’s advance was broad-based, and both volumes and core sales appear to be on solid footing. October growth looks to be even more outsized.
After today’s release, we’re tracking annualized real GDP growth of 1.0% for Q3, below the latest Bank of Canada (BoC) projections (1.5%). For Q4, our tracking is in the 2% to 2.5% range, roughly in line with the Bank’s 2% forecast.
With inflation back at 2% and the consumer on an increasingly solid footing, we expect that the BoC will cut the policy rate by 25 basis points in December, and should continue its rate-cutting cycle next year (see our latest Economic and Financial Outlook) External link..
Looking further ahead, still-elevated shelter inflation and upcoming mortgage renewals could continue to temper household spending in the coming months. Although declining borrowing rates, thanks to anticipated Bank of Canada rate cuts, should ease consumer finances. The federal government’s announced GST break External link. for certain retail purchases could also temporarily boost consumer spending from mid-December until mid-February. And the checks being mailed out by the Government of Ontario early in the new year and the Government of Canada in Q2 2025 won’t hurt either. As such, retail sales per capita could improve next year, although we expect overall nominal sales to soften amidst sharply slowing population growth (as per government-planned reductions in non-permanent and permanent residents).