Highlights:
- Retail sales increased 0.3% in nominal terms in October, but in part boosted by the incorporation of Cannabis sales post October 17th legalization. Overall sale volumes were flat in the month.
- E-commerce sales (which likely contain significant Cannabis sales from Ontario, where Cannabis is initially only being sold legally online) 19.3% year-over-year, well above the pace of overall retail sales growth.
Our Take:
Nominal sales increased 0.3%, but only because of higher prices — excluding price-effects sales were unchanged in the month. The month-over-month increase in nominal sales was also in part, although minimally, impacted by the first reported sales of cannabis following legalization on October 17th. Statistics Canada estimated that the half-month of cannabis sales totaled ~$43 million, enough to boost the headline retail sales number by ~0.1 percentage points.
The monthly data is often volatile but broader trends at this point remain consistent with consumer spending continuing to grow, albeit at a slower pace. Sale volumes were flat in October but that followed a 0.3% increase in September, so the data is still tracking right in line with our call for a 1.8% increase in consumer spending in Q4. That’s significantly slower than the 3 1/2 % increase in spending last year as a whole, but still reasonably solid for this point in the economic cycle. Higher interest rates will continue to bite into household purchasing power but labour markets still look strong to-date. And, looking through transitory disruptions, broader economic data still looks okay — including the stronger-than-expected 0.3% increase in GDP in October also reported this morning. Despite recent financial market volatility, at this point we continue to expect that some further gradual rate hikes from the Bank of Canada will ultimately be warranted.
