Sales at Canadian retailers rose in November for the second straight month as consumers spent more on gasoline, building materials and food, Statistics Canada said Friday.
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Still, the 0.7% rise in sales to $58.1 billion was lower than expected by economists.
It was also down from the 1.6% advance recorded in October, indicating a slowdown following the jump in consumer spending in the early fall.
This potential slowdown is accentuated if we take into account Statistics Canada’s preliminary estimate for the month of December, which seems to announce a 2.1% decline in retail sales.
The federal agency said its preliminary estimate would be revised, but it suggests a bumpy economic recovery in which periods of accelerated growth are followed by setbacks.
“While we expected weakness in December, the decline appears to be somewhat larger than expected,” CIBC Capital Markets economist Andrew Grantham said in a note to clients.
If preliminary data for manufacturing and wholesale sales, due out next week, also falls short of expectations, it might mean December’s gross domestic product (GDP) was weaker than expected, a- he continued.
“Signs of a slowing economy, even before the number of (COVID) cases peak and the impact of restrictions take effect, might tip the balance slightly for the Bank of Canada, which might hold rates next week and wait to see signs of recovery before raising them,” Grantham said.
The spending slowdown prompted some economists to issue muted projections for the coming months.
The Conference Board of Canada said it expects retail sales to decline over the next two quarters, before rising moderately in the second half of the year.
“Although we are still optimistic regarding the future, new waves of the virus might discourage our outlook, despite the high vaccination rate in Canada,” the research group said in a note.
“As we learned with Omicron, widespread lockdowns are not entirely a thing of the past.”
Impact of floods on sales
Severe flooding in British Columbia and parts of the Atlantic provinces damaged infrastructure and hurt business activity, which impacted retail sales in November, Statistics Canada said.
Around 21% of retailers surveyed in these regions said their sales had been affected by the floods, mainly due to transport disruptions.
Overall, November’s sales increase was fueled by a 4.9% jump in gas station sales, a 3.0% increase in sales of building materials and gardening equipment and supplies , and by 1.0% growth in food store sales.
Core retail sales, which exclude sales at gas stations and motor vehicle and parts dealerships, climbed 0.5%, the agency said.
Consumers also spent more on clothing and clothing accessories, which rose 3.0% in November.
Sales at jewelry stores and luggage and leather goods stores rose 5.7%.
Overall, sales climbed in six of the 11 subsectors surveyed by the agency, accounting for nearly 63.8% of retail sales in November, Statistics Canada said.
Expressed in volume, retail sales advanced 0.2% in November.
Seven provinces saw retail sales advance in November, with Quebec’s 1.2% gain being the strongest, Statistics Canada said. Sales rose 0.5% in Ontario and 3.0% in New Brunswick, but fell 0.2% in Nova Scotia and 1.2% in Prince Edward Island. Edward.
Economist Shelly Kaushik of BMO Capital Markets said retail sales posted a decent gain in November, although much of it was due to higher prices as inflation eroded the power of purchase.
The story will be different for December, which is expected to see an outright decline, she said.
“Stricter restrictions appear to have limited spending in December,” Kaushik said in a note to clients. “Consumers seem ready and willing to spend, but they can only do so when they are allowed to.”
Looking ahead, analyst Ksenia Bushmeneva of TD Economics said the retail spending picture was mixed.
“Capacity limits, staff absenteeism and health issues may weigh on store sales at the start of the year,” she said in a note. “Supply chain bottlenecks are also likely to intensify once more, leading to shipping delays, higher prices and less choice for consumers.”
Retailers with online operations might also see increased sales as consumers redirect spending from services to goods, similar to previous lockdowns, Bushmeneva said.
Brett Bundale, The Canadian Press
