Canadian retail sales dropped 0.9% (m/m) in November, following the prior month’s revised 0.2% increase (previously reported as 0.3%). This comes against consensus expectations for a 0.6% decline. After accounting for price changes, volumes were still down a disappointing -0.4%.
Performance across the subsectors was generally weak, with sales down in six out of the eleven categories. The headline decline was driven primarily by lower gasoline prices and sub-par auto sales, which resulted in a 5% drop in sales at gasoline stations (-1.5% in real terms) and a 1.8% drop in sales at motor vehicle and parts dealers (also -1.8% in real terms), respectively. Excluding those two volatile categories, nominal retail sales were up a modest 0.2%.
Consistent with housing market softness, sales dropped again in furniture and home furnishing stores (-0.4%, +0.1% in real terms) and in building materials and gardening equipment stores (-0.3%, -0.1% in real terms).
E-commerce sales, reported on a year-on-year basis, were up 20.1%, continuing its outperformance.
Regionally, the decline was relatively widespread, with sales down in eight out of the ten provinces. Ontario (-1.6%) and Quebec (-1.5%) led the declines, whereas Alberta (+1.9%) saw the first monthly increase following three months of declines. Performance across the Atlantic provinces was weak, with sales down in all four provinces.
Key Implications
This release came in a bit worse than expected. The disappointing volumes print and the downward revision to the previous month’s data add salt to the wound. Combining this data and yesterday’s manufacturing and wholesale trade data leaves our fourth quarter GDP tracking a tick lower at 1.5%, roughly in line with Bank of Canada expectations.
Going forward, healthy labour markets should continue to provide some support to consumer spending. Nevertheless, this will likely be countered by rising borrowing and debt-servicing costs. November’s retail sales data reinforces the moderating growth narrative, and reinforces the need for a shift away in real GDP growth from consumer spending to investment and exports to keep growth around its long-term trend.
