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Canada: Retail Trade Enters Holiday Season on a High Note.

Retail sales rose by 0.7% month-on-month (m/m) in October, coming in slightly lower than Statistics Canada’s advance estimate of the +0.8% m/m reading. September’s print was revised slightly lower to +0.6% m/m from +0.7% m/m, reported in the advance estimate.

Adjusting for inflation, the volume of retail sales reported a solid gain of 1.4% in October – the highest reading since December of last year.

The biggest driver of today’s gain was sales at motor vehicle and parts dealers, which continued to recover from declines reported in the last two months of the summer. This category was up by 1.1% m/m in nominal and 0.5% m/m in real terms.

Offsetting some of these gains were weaker sales at gasoline stations and fuel vendors, which declined by 3.1% m/m. The lower reading was in part due to softer prices at the pump as demand appears strong: in volume terms, receipts were also up 2.2% m/m in October.

Excluding sales at car dealerships and gas stations, core retail sales were up 1.2% in nominal and 1.7% in real terms in October. Gains were broad based, with sales at general merchandise stores (+2.0% m/m) doing most of the heavy lifting. The only category that spilled red ink this month was building material & garden equipment dealers, which registered a 0.2% m/m loss.

E-commerce sales turned positive this month, gaining 1.8% m/m and breaking its two-month losing streak.

Key Implications

Canadian consumers have been in the festive spirit this holiday season, having broadened their spending across several categories. Looking ahead, auto sales are tracking strong and our own card spending estimates point to a higher reading in November. Meanwhile, Statistics Canada expects sales to come in flat next month based on responses from roughly half of retailers surveyed.

With consumers humming Jingle Bells as they strolled through the malls this holiday season, we expect personal consumption expenditure to grow by a solid 1.5% annualized in Q4. While improved spending patterns during the holiday season has hit a high note, it’s uncertain if this harmonious rhythm will play on in the same key into the new year as spending is forecast to decelerate in the first half of 2024.

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