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Economic News

Canada: A Mixed Bag for Retail Sales in January

March 22, 2024
Florence Jean-Jacobs
Principal Economist

Highlights

  • Canadian retail sales edged down 0.3% m/m in January, after advancing 0.9% in December. This was slightly above Statistics Canada’s earlier flash estimate and the consensus of economic forecasters (-0.4%). The table below summarizes key data points.
  • The decline was led by auto sales, down 2.4%, halting four consecutive advances in prior months. The decrease at new car dealerships surpassed gains at used car dealers and auto parts retailers.
  • Sales at gasoline stations were up 0.9% in January, thanks to strong volumes.
  • Core retail sales—which exclude gasoline and auto sales—advanced 0.4%, led by higher sales in sporting goods, hobby, musical instrument, book and miscellaneous retailers. Food and beverage retail sales declined.
  • Retail sales increased in Ontario, but decreased in BC and Quebec, despite the end of the public sector strike in the latter province in January.
  • With retail prices down 0.6% on the month, volumes edged up 0.2% (graph).
  • Statistics Canada’s flash estimate for February nominal retail sales points to a 0.1% increase. This could mean slight growth in volumes, given the 0.2% decrease m/m in seasonally adjusted CPI goods.  

Implications

There are two sides to the January retail sales story. On the one hand, the strong contraction in auto sales seems to indicate that the momentum in consumer durable purchases is fading. On the other hand, despite the sharp decrease in sales at auto dealerships, other retail categories remained buoyant and real retail sales were up. Excluding autos, retail sales beat expectations, advancing 0.5% in January, similar to December (+0.6%).  

While we expect Canadian consumers to continue to be cautious with durable goods and discretionary spending in the coming months, Canadian GDP growth is tracking a respectable 1.3% annualized in Q1, in line with our latest Economic and Financial Outlook External link.. That is higher than the Bank of Canada’s projection of 0.5% in its January 2024 Monetary Policy Report. However, despite those signs of early-year strength, inflation continues to cool off. Accordingly, we remain of the view that the Bank of Canada will begin reducing its policy rate in June of this year.

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.