Retail sales are holding up ... for now

Retail sales rose 0.5% in December, in line with consensus expectations and Statistics Canada’s flash estimate. Sales were higher in 7 of 11 subsectors, led by gains in sales at motor vehicle and parts dealers (+3.8%) and general merchandise stores (+1.7%). In contrast, sales at gasoline stations were down 5.8% in December. At the same time, core retail sales – purchases excluding gas stations and motor vehicle and parts dealers – rose a still-respectable 0.4% in the final month of 2022. Building on December’s momentum, Statistics Canada’s advance estimate of retail sales is pointing to a gain of 0.7% in January 2023.

Retail sales for December suggested that Canada’s economy ended 2022 on a positive note. However, some of that momentum might be fleeting. As a result, the flash estimate of ongoing strength in retailing won’t be enough to change the Bank of Canada’s outlook that the economy is set to slow down sharply this year.