After a four-month streak of strong gains, Canadian shoppers ended their spending spree in November. An advanced estimate from Statistics Canada revealed that retail sales were unchanged last month, following a 0.6 percent gain in October.
Background and Context
The central bank has reduced borrowing costs by 175 basis points since June, with a second straight half-percentage point cut last week. This move is expected to continue early next year, albeit at a slower pace than the second half of this year. The Bank of Canada’s policymakers are expected to keep cutting borrowing costs in response to the current economic conditions.
Retail Sales Figures
The statistics agency revised retail sales for the third quarter upward to 1.1 percent, from 0.9 percent previously. This increase occurred even as population growth slowed over that period. 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.
Regional Breakdown
Regionally, sales were up in seven of ten 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 percent of companies surveyed.
Wholesale Sales
In a separate release, advance data showed wholesale sales fell 0.7 percent in November. This decline is notable, as it suggests that businesses may be reducing their inventory levels in response to changing consumer demand.
Excluding Autos
Excluding autos, sales rose 0.1 percent, missing economist expectations for 0.4 percent growth. This missed expectation is significant, as it indicates that the retail sector may be experiencing a slowdown in demand.
Core Retail Sales
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 percent, a second consecutive increase. This growth was led by higher sales at furniture, electronics, and appliances retailers as well as health and personal care stores.
Volume Terms
In volume terms, retail sales were unchanged in October. This stagnation is notable, as it suggests that the retail sector may be experiencing a slowdown in demand.
Commentary from Economists
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."
Grantham’s comments are significant, as they suggest that the retail sector may be experiencing a slowdown in demand. However, this slowdown is expected to have minimal impact on inflation.
Conclusion
The retail sales figures for November indicate that Canadian shoppers ended their spending spree after a four-month streak of strong gains. The statistics agency reported that retail sales were unchanged last month, following a 0.6 percent gain in October. This stagnation is notable, as it suggests that the retail sector may be experiencing a slowdown in demand.
However, economists are divided on the implications of this data. Some argue that the decline in wholesale sales and the stagnation in core retail sales suggest that businesses may be reducing their inventory levels in response to changing consumer demand. Others argue that the growth in core retail sales and the continued decline in receipts at gas stations indicate that consumers continue to prioritize spending on essential goods.
Ultimately, the impact of this data on inflation remains uncertain. However, it is clear that the retail sector continues to experience significant changes in demand and supply, which will have a lasting impact on the Canadian economy.
Sources:
- Statistics Canada
- Bank of Canada
- Bloomberg.com
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