Highlights:
- Retail sales fell 0.9% in November with declines in 6 of 11 subsectors.
- Motor vehicle sales were down nearly 2% (a decline flagged by earlier unit sales reports) and sales at gasoline stations fell 5% on lower prices.
- Sales volumes were down 0.4% and little changed from a year earlier.
- E-commerce sales were up 20% from a year ago and accounted for more than 4% of retail trade in November.
- Following yesterday’s soft manufacturing and wholesale data, we maintain our monitoring for a 0.1% decline in November GDP.
Our Take:
Canadian retail sales were slightly weaker than expected in November, falling nearly 1% from the previous month. As anticipated, lower nominal sales at auto dealers and gasoline stations were restraining factors (the latter price-related). Outside those two sectors, retail spending edged up 0.2%—just a touch slower than we thought. But overall sales volumes were down in the month and effectively flat relative to a year earlier. The second half of 2018 (at least through November) was a tough stretch for retailers, with consumers cutting back on purchases of durable goods in particular. Sales of furniture and building materials fell amid slumping home sales, while auto sales were likely weighed down by rising interest rates. It’s hard to see spending on those items rebounding in 2019 as we expect further interest rate hikes (though at a slightly slower pace than in 2018) and another year of subdued home sales. Households in general will face pressure from rising debt service costs, including continued pass-through of earlier rate increases. Consumer spending added 2 ppts to GDP growth in 2017 but just 1.3 ppts last year. We think the contribution will be less than 1 ppt this year.
