Retail sales advanced a robust 1.5% in October, building on September’s upwardly revised 0.2% gain (was 0.1%). The gain was almost entirely due to volumes, which rose an impressive 1.4%.
Higher sales at motor vehicle and parts dealers was the main driver behind October’s gain (+3.3%), but sales excluding motor vehicle and parts dealers were also up 0.8%. Sales increased notably at food and beverage stores (1.1%), general merchandise stores (1.8%), health and personal care stores (1.2%) and electronics and appliances stores (1.4%). Housing-related sales were a mixed bag in the month, increasing at building material and garden equipment stores (1.1%), while dropping at furniture and home furnishing stores (-0.9%).
Sales increased in every province, with Ontario, Quebec and British Columbia accounting for the majority of the gain in the month.
Key Implications
With consumers in high spirits amidst low unemployment and rising wages, retail sales volumes advanced solidly in October. The solid increase in real retail spending is consistent with our view that real GDP growth accelerated in the fourth quarter, with a “3-handle” on growth appearing likely.
Looking ahead to 2018, we expect consumer spending to play an important role in supporting economic growth, buoyed by continued employment and income growth. However, some moderation from 2017’s breakneck pace is likely, especially as interest rates continue to normalize.
Today’s solid sales volumes data provides another point in the favour of the Bank of Canada hiking rates sooner rather than later. Our expectation is that the central bank will take rates higher in early 2018.
