By Robb M. Stewart
OTTAWA--Canadians look to have opened their wallets during the holiday season after cutting back on spending at retailers in the lead-up, a mixed signal for central bank policymakers ahead of next week's rate decision.
Retail sales rose 0.8% in December, according to Statistics Canada's advance estimate of receipts released Friday.
That comes after sales in November retreated 0.2% to a seasonally adjusted 66.61 billion Canadian dollars, the equivalent of about $49.38 billion, the data agency said. Compared with a year earlier, retail sales in November were 1.8% higher.
The early indication for December sales was based on responses of just under half of retailers surveyed and will be revised, but if it holds would mark the strongest month since April. It also hints at the continued resilience of households last year despite sharply higher interest rates and sticky inflation, with retail sales provisionally up an average 2.2% from 2022.
Still, November's pull back in spending compares with the flat sales economists expected and forecast in Statistics Canada's advance estimate, and follows back-to-back sales increases of 0.5% the previous two months. It also highlights hesitancy by consumers, who in a recent Bank of Canada survey indicated they plan to scale back spending amid rising concerns about the health of the economy.
Sales for the month were lower in four of the nine subsectors tracked by the agency, led by declines at food and beverage retailers, which dropped 1.4% month-over-month.
Stripping out gasoline stations and motor-vehicle and parts dealers, and the fall in core retail sales was even steeper, declining 0.6% from October.
In volume terms, price-adjusted sales slipped 0.2% for the month.
"The headline drop in retail sales was disappointing," said Shelly Kaushik, economist at Bank of Montreal. "Weak sales volumes point to an economy that remained at a standstill in November as consumers continue to adjust to a higher interest rate environment."
The retail data is the last major indicator before the release at the end of the month of industry-level gross domestic product for November, though the central bank will Wednesday decide on interest rates having left its benchmark rate steady at each of the last three policy meetings. Most economists anticipate the Bank of Canada will again sit tight and wait for further signals inflation is sustainably heading lower, though markets are pricing in a rate cut as early as the spring.
After contracting in the third quarter on an annualized basis, economists expect the economy saw little growth in the final three months of the year. Factory sales and wholesale trade both rose in November, recovering from declines the month before. Signs of a rebound in retail sales in the final month of the year indicate consumer spending added to the economy in the quarter.
"After consumer spending stagnated in the third quarter, it looks to have been a positive growth contributor in the fourth quarter," said Katherine Judge, senior economist at CIBC Capital Markets. Judge doesn't expect the momentum to last, given survey evidence households are increasingly worried about job prospects and mortgage renewals, which will weigh on spending early this year.
Retail receipts for November showed Canadians spent less at grocery stores and supermarkets, and cut back spending on beer, wine and liquor. Sales also fell at general merchandise stores, but increased at clothing and accessories, jewelry and leather goods retailers.
Sales at motor vehicle and parts dealers were up for a third consecutive month, rising 0.5% from October despite a fall in trade at used car dealers. Sales at gas stations and fuel vendors also increased, driven by a strong increase in volumes, the agency said.
Write to Robb M. Stewart at robb.stewart@wsj.com
(END) Dow Jones Newswires
01-19-24 1041ET
