Retail sales in Canada fall flat after 4 month surge

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Canadian shoppers ended their spending spree in November after a four-month streak of strong gains.

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An advanced estimate suggests receipts for retailers were unchanged last month, following a 0.6 per cent gain in October, Statistics Canada said Friday. October’s increase slightly missed expectations for a 0.7 per cent jump in a Bloomberg survey of economists.

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Retail figures point to fading momentum in consumption as Bank of Canada policymakers are expected to keep cutting borrowing costs early next year, albeit at a slower pace than the second half of this year. The central bank has reduced borrowing costs by 175 basis points since June, with a second straight half-percentage point cut last week.

The statistics agency revised retail sales for the third quarter upward to 1.1 per cent, from 0.9 per cent previously. The spike in spending occurred even as population growth slowed over that period.

Canadian government two-year bond yields fell about two basis points after the release to 3.041 per cent at 8:54 a.m. in Ottawa. The loonie weakened to $1.4391 per American dollar. The data were released at the same time as the Federal Reserve’s preferred measure of underlying inflation cooled to its slowest pace since May.

In a separate release, advance data showed wholesale sales fell 0.7 per-cent in November.

In October, retail sales were up in five of nine sub-sectors, led by increases at both new and used car dealers. Excluding autos, sales rose 0.1 per cent, missing economist expectations for 0.4 per cent growth.

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Receipts at gas stations were down for a sixth straight month in October. Core retail sales, which exclude gas stations and car dealers, edged up 0.2 per cent, a second consecutive increase, led by higher sales at furniture, electronics and appliances retailers as well as health and personal care stores.

In volume terms, retail sales were unchanged in October.

The announcement by the federal government in late November of a sales tax holiday on some items beginning in mid-December may have encouraged some households to defer purchases, Andrew Grantham, economist at Canadian Imperial Bank of Commerce, said in a report to investors.

“Even though the latest release wasn’t as strong as the prior one, consumer spending has still clearly improved relative to the trend seen earlier in the year. However, that fact is to be welcomed and not feared from an inflation point of view,” he said.

“Evidence of bloated inventory levels in the retail sector during the first half of the year showed plenty of room for spending to accelerate without necessarily resulting in upward pressure on prices.”

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Regionally, sales were up in seven of 10 provinces, with some of the biggest increases seen in Ontario and British Columbia, led by higher car sales.

The statistics agency didn’t provide details on the November estimate, which was based on responses from 50.6 per cent of companies surveyed. The average final response rate for the survey over the previous 12 months was 88.7 per cent.

—With assistance from Erik Hertzberg.

Bloomberg.com

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