Canada: October retail treat to follow September trick

Retail sales fell 0.5% in September, in line with the consensus of forecasters and Statistics Canada’s advance estimate. Sales were down in 7 of 11 subsectors, led by lower sales at gas stations (-2.4%) and food and beverage stores (-1.3%), the former due to lower oil prices. With about half of Statistics Canada’s survey responses received so far, the flash estimate for October is for a gain of 1.5%. This would be the strongest monthly advance in retail sales since May 2022.

Today’s retail release didn’t move the needle on our tracking for Q3 real GDP growth of around 1.5% annualized. Where the impact is being felt is in October, as the outsized gain expected in the month should provide an additional boost to Q4 real GDP. We’re currently tracking growth in the final quarter of 2022 which is well above the Bank of Canada’s 0.5% forecast. This will pose challenges for the Bank as it looks to keep inflation on a downward trajectory while trying to engineer the softest landing possible.