Retail sales rose by a healthy 0.4% month-over-month (m/m) in September, in line with Statistics Canada’s advance estimate.
Sales were even stronger in real terms. When adjusted for inflation, the volume of retail sales was 0.8% higher on the month.
One weak spot was sales at motor vehicle and parts dealers, which declined by 0.7% m/m after two consecutive months of gains.
Lower gasoline prices also weighed on headline retail sales. Receipts at gas stations and fuel vendors dropped by 2.3% m/m in nominal terms but gained 3.2% m/m in real terms.
Excluding both auto sales and gas station receipts, core retail sales rose by 1.4% m/m in September, driven by food and beverage stores (+3.0% m/m) and building material and garden equipment stores (+3.0% m/m).
E-commerce sales rose by 3.3% m/m, following a 1.5% decline recorded in the previous month.
Statistics Canada’s advance estimate for October points to another solid increase of 0.7% m/m.
Key Implications
Retail sales gained momentum toward the end of the third quarter, rising 3.5% on a quarter-on-quarter (q/q) annualized basis in Q3. This strong finish sets real consumption spending on track for a 1.5-2.0% gain in the third quarter.
The Bank of Canada may have gotten what it wanted: a rebound in consumption growth. Statistics Canada’s advance estimate and our internal spending data point to further acceleration in October, particularly in home-related purchases. Additionally, the recent proposed tax holidays could provide a significant boost to consumer spending during the exemption period from mid-December to mid-February. This holiday shopping season may have a bit more sparkle than expected.
