- Nominal retail sales surged 2.2% in January following a 0.4% dip in December.
- Auto sales were, as expected, a large contributor (+3.8%) but sales excluding autos also bounced-back 1.7% following a 0.5% dip in December.
- Sale volumes posted a strong 1.3% gain to reverse the 1.0% drop in December.
- ‘E-commerce’ sales rose 17.2% from a year-ago in January
Our Take:
The 1.3% bounce-back in retail sale volumes in January more-than-reversed the 1.0% decline in December that in turn had marked only the first dip in six months. The measure in January is already 3.3% (at an annualized rate) above its Q4 average. Employment gains have been solid, as has household income growth (with the latter in part supported by increased federal government child tax benefit payments that began in the summer). Interest rates remain at extremely low levels and consumer confidence jumped to a more-than seven year high in February with increasing optimism about the economic outlook seemingly outweighing uncertainty about the future of Canada’s trading relationship with the United States. In terms of ‘hard’ data, auto sales in February, by our estimate, ticked higher from what were already highly elevated levels in January (with sales over the two months pacing well-above the fourth consecutive annual auto sales record posted in 2016). In short, there is little to suggest that consumer spending is slowing from levels that already accounted for a record share of GDP in 2016.
Strong retail numbers for January followed earlier solid increases in sale volumes in both the manufacturing (+0.7%) and wholesale (+3.4%) sectors. As a whole, the data suggests stronger economic momentum in the second half of 2016 may have carried over more significantly than we previously assumed into early 2017. Data to-date suggests January GDP growth may have matched the solid 0.3% December increase which would leave Q1 growth tracking closer to a 2½% to 3% range than the 1.9% pace projected in our current forecast.
