- Florence Jean-Jacobs
Principal Economist
Canada: Retail Sales Cooled in November, but Expect a Rebound in December
Highlights
- Retail sales were flat in November, in line with Statistics Canada’s flash estimate of 0.0% m/m but below the consensus of economists (0.2%). The table below summarizes key data points.
- Sales at motor vehicle and parts dealerships posted strong growth for a second consecutive month, up 2.0% in November.
- Receipts at gas stations also advanced, up 0.7%, the first positive print since April. This was driven by higher prices at the pump, while volumes edged down.
- Core sales, which exclude gasoline and motor vehicles, declined 1.0%, the sharpest drop in six months. This was led by lower sales at food and beverage establishments, but other sub-sectors also contracted (general merchandise and building material and garden equipment retailers, notably).
- Real retail sales contracted 0.4% month-over-month, ending a four-month streak of advances.
- Most provinces experienced declines in retail sales in November, except for Ontario, BC and Newfoundland and Labrador.
- Statistics Canada’s flash estimate for December points to a strong print of +1.6%. Given that goods prices were up 0.3% in December (on a seasonally adjusted basis), it appears volumes were a major contributor to that strength.
- If December’s flash proves correct, retail sales will have surged by an annualized 7.1% q/q in Q4, following a 4.3% advance in Q3 and declines of -1.7% and -1.9% in Q2 and Q1, respectively. This would entail annual retail sales growth of about 1.1% in 2024 compared to 2023.
Implications
Today’s release suggests that Canadians held onto their purses in November, only to postpone their holiday spending to December. This was to be expected, given the GST/HST holiday introduced by the federal government starting midmonth.
The continued strength in auto sales helped offset declines elsewhere in November. The Bank of Canada’s (BoC) rate cuts and an incentive to purchase electric vehicles (EVs) before a planned reduction in EV rebates were likely contributing factors. It remains to be seen if that strength can last.
After today’s release, we’re tracking annualized real GDP growth north of 2.5% for Q4, above the Bank’s tracking of 2.0% from the October Monetary Policy Report. We expect the BoC to proceed with a more modest 25 basis point rate cut next week but could take a pause in March.
Looking ahead, the BoC’s latest survey External link. points to improved consumer sentiment, helped by rate cuts and expectations of more to come. The Ontario government’s plan to send $200 to every eligible adult and child in Ontario early in the new year could provide some tailwind to spending in Q1. Still, we anticipate elevated housing costs to continue to weigh on Canadians’ spending decisions. The decelerating pace of population growth is also expected to soften nominal retail sales in the coming year. Higher costs of imported goods in the context of a potential trade war with the US could put a similar chill on consumer spending this year.