- Canada’s retail sales declined 1.2% in October, following an upwardly revised flat print in September (previously reported as -0.1%). The release was significantly lower than the consensus estimate for a 0.5% increase.
- The picture was more disappointing after stripping out price impacts, with retail sales volumes down 1.4%.
- The decline was broad-based. Sales were down in 8 of the 11 major categories, with lower sales at motor vehicles and parts dealers (-3.2%) contributing the most to the headline drop. Sales at building material and garden equipment stores were also notably weak (-3.1%). Providing some offset were higher sales at gasoline stations (+1.5%).
- Regionally, sales were down in 6 of the 10 provinces. Ontario (-2%) drove the bulk of the decline, but sales were also notably disappointing in Quebec (-1.7%), British Columbia (-0.9%), and Saskatchewan (-1.7%). Providing some modest offset were higher sales in Alberta (0.4%), Manitoba (1.1%), and some of the Atlantic provinces.
Key Implications
- With the exception of housing markets, Canadian economic releases in the past few weeks have been unambiguously negative. This one is no different. As a result, we are expecting a continued tepid performance for the Canadian economy in the fourth quarter.This release adds some modest downside risk to our 1.2% real GDP tracking for the quarter.
- Retail sales are on track to record the weakest performance since the financial crisis. This is notably disappointing considering the surge in population growth that Canada has been seeing of late. The sector continues to face the cross-currents of high household debt servicing costs against the tailwinds of improving housing markets and firming wage growth. We expect these tailwinds to provide only a modest uptick in the months ahead.
