- Canada’s retail sales increased 0.9% in November, following an upwardly revised 1.1% decline in October (previously reported as -1.2%). The release was higher than consensus expectations for a 0.6% increase and is the strongest print since March of last year.
- The picture was still positive after stripping out price impacts, with retail sales volumes up 0.7%.
- Retail sales rose in six of the 11 major categories. Driving the bulk of the increase were higher sales at motor vehicles and parts dealers (+3%), which were led by higher sales at new car dealers (+2.8%). Excluding this category, retail sales were up a modest 0.2%. Sales at building material and garden equipment and supplies dealers (+2.1%) and food and beverage stores (+0.9%) were also decent.
- Regionally, sales were up in six of the 10 provinces. Ontario (+1.6%) led the overall increase. Sales were also strong in Quebec (+1.4%) and British Columbia (+1.1%).
Key Implications
- The upside surprise in November’s retail sales print is a nice change from the recent string of disappointing Canadian data, and what has been a lackluster year for Canadian retail sales. However, one month of data doesn’t make a trend, and it is important to note that the headline print was disproportionately driven by a bounce back in auto sales. We still expect a tepid performance for the Canadian economy in the fourth quarter.
- Responses to the Bank of Canada’s new Canadian Survey of Consumer Expectations provide some respite to the softness seen in the sector this year. Indeed, responses indicate that expectations for household spending growth have been edging higher throughout the year. This was likely driven by healthy labour markets, wage growth, and strengthening housing markets. That said, the sector will remain caught between these tailwinds and elevated debt-servicing costs.
