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Florence Jean-Jacobs
Principal Economist
Economic News
Canada: Retail Sales Stall in November
January 19, 2024
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Florence Jean-Jacobs
Principal Economist
Highlights
- Canadian retail sales edged down 0.2 % m/m in November, after two consecutive monthly advances. This was slightly below Statistics Canada’s earlier flash estimate and the consensus of economic forecasters (0.0%). The table below summarizes key data points.
- Growth in gasoline and auto sales did not compensate for declines in other retail sectors. Despite lower prices, gasoline sales were up 0.3% in nominal terms thanks to a solid increase in volumes. Sales at motor vehicles and parts dealers advanced 0.5%—the third consecutive monthly move higher. That said, it was at a slower pace than the last two months (1.7% and 0.7% in September and October, respectively).
- Weakness in core retail sales (-0.6 %) – which exclude gasoline and auto – was led by marked declines at supermarkets and grocers, as well as beer, wine and liquor retailers.
- Sales decreased in half of the provinces, led by Saskatchewan (-2.2%) and Quebec (-1.4%).
- With real retail prices flat on the month, volumes declined 0.2% following gains in the prior two months (graph).
- Statistics Canada’s flash estimate for December nominal retail sales points to a 0.8% increase, albeit more muted in volume terms if the seasonally adjusted December goods CPI data is any indication. If the December flash proves correct, nominal retail sales would advance by 3.8% annualized in Q4 2023—the strongest print since the final quarter of 2022.
Implications
Weakness in core retail sales in November points to consumers making cautious spending decisions, especially for food and beverage. However, with November pre-holiday sales increasing in popularity, other spending categories advanced in the month (furniture, electronics and appliances, as well as clothing and accessories). We don’t expect this to persist into the new year. And although auto sales continue to grow, it looks like momentum is gradually fading.
After accounting for today's retail release for November, our tracking has not changed for Canadian GDP growth in Q4. We still anticipate a modest advance of around 0.5% annualized, as per our latest Economic and Financial Outlook External link. This link will open in a new window.. That is broadly in line with the Bank of Canada’s projection in its October 2023 Monetary Policy Report. Of course, a lot has changed since, notably Q3 real GDP growth coming in well below the Bank’s latest forecast. Inflation also came in slightly below the Bank’s forecast for Q4. As such, we’ll be closely watching how the Bank of Canada is interpreting this data at next week’s meeting. We currently anticipate the Bank of Canada to begin cutting interest rates in April.