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Economic News

Canada: Retail Sales Are Up, but There’s Weakness Under the Hood

December 20, 2024
Florence Jean-Jacobs
Principal Economist

Highlights

  • Retail sales rose by 0.6% in October, one tick less than Statistics Canada’s flash estimate. The table below summarizes key data points.
  • Strong growth of sales at automotive and parts dealerships drove much of the advance, up 2.0%.
  • Receipts at gas stations were down 0.5% in nominal terms, driven by a sharp drop in volumes in October (erasing their September surge).  
  • Core sales, which exclude sales of gasoline and motor vehicles, increased by a modest 0.2%. Strength in furniture, home furnishings, electronics and appliances compensated the decline of purchases at food and beverage stores.
  • Real retail sales remained roughly flat in October, after a solid Q3 advance.
  • Retail sales were up in seven provinces. After a string of declines in the first half of 2024, Ontario posted its third consecutive advance, with sales up 0.9% in October. 
  • Statistics Canada’s flash estimate for November points to a flat print. Given that goods prices were up 0.1% in November (on a seasonally adjusted basis), volumes likely edged down.

Implications

With an upward revision to September data, Canadian nominal retail sales growth has now surpassed 0.5% for four consecutive months. Under the hood, however, today’s release is less rosy. October’s monthly gain was very much a price story (see graph). And if we exclude automotive and parts, retail sales inched up only 0.1%, the weakest print since May. Gains were not broad-based, with only 5 of 9 subsectors rising. Combined with an anticipated flat print in November, the picture of consumer spending pre-holiday is a subdued one. Looking further ahead, the GST break announced on November 21, and coming into effect mid-December, may have resulted in consumers postponing spending. If so, December’s retail sales number could show a rebound, as our research External link. suggests. That said, one positive development in October is continued improvement in nominal retail sales per capita.

After today’s release, we’re tracking annualized real GDP growth in the range of 2.0% to 2.5% for Q4, broadly in line with the Bank of Canada’s latest forecast. With inflation at 1.9% in November and plenty of uncertainty on the economic horizon, we expect the Bank’s January cut to be a more modest 25 basis points, following its two jumbo cuts in October and December. Three additional rate cuts of the same size are likely through the remainder of 2025, as upcoming mortgage renewals and still-elevated shelter inflation should weigh on household budgets and consumption (see our latest Economic and Financial Outlook External link.).

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.