Retail sales kicked off 2017 on a strong note, with January’s 2.2% increase in sales more than recouping December’s loss. In real terms, sales were up by a robust 1.3%.
January’s gains were widespread, with sales at health and personal care stores (+6%), motor vehicle and parts dealers (+3.8%) and electronics and appliance stores (+3.7%) leading the way – all of which bounced back from a decline in December.
Regionally, sales were up across the board, led by PEI (+4.3%), Saskatchewan (+3.7%) and B.C. (+2.9%).
Key Implications
This was a good report all around. The bounce back in retail sales in January is in line with our outlook for consumer spending growth of around 2.5% in the first quarter, and puts overall economic growth on track to record a pace of 3% (annualized) or more in the first quarter.
Supported by robust job creation and wealth effects related to home price gains, consumers will remain a key driver of economic activity this year. Nonetheless, the strength is likely to fade somewhat in the coming quarters. A gradual rise in longer-term interest rates consistent with higher borrowing costs stateside, and some signs of a cooling in the housing market, will likely prompt highly-indebted Canadian consumers to rein in spending. That said, at close to 2%, overall consumer spending growth will remain at a healthy level.
