Canada: Retail Sales flat in November, But Likely to Remain a Key Driver of Real Consumption in Q4 – Action Forex

Retail sales were flat month-over-month (m/m) in November, right in line with the Statistics Canada’s advance estimate.

In real terms, however, sales declined by 0.4% m/m.

Sales at motor vehicle and parts dealers were up by 2.0% m/m, building on October’s strong gains of 2.4% m/m. Ex-autos, sales were down 0.7% m/m, falling short of the consensus expectation of 0.1% m/m growth.

Receipts at gas stations and fuel vendors rose by 0.7% m/m in nominal terms and by 0.8% m/m in real terms, reflecting softer prices.

Excluding both auto sales and gas station receipts, core retail sales fell by 1.0% m/m in November, following a downwardly revised flat reading in October (previously reported as +0.2% m/m).

• The decline was driven by food and beverage retailers (-1.6% m/m), building material & garden supply dealers (-2.1% m/m), and general merchandise stores (-1.0% m/m).
• Gains at miscellaneous store retailers (+0.7% m/m) and furniture and home furnishings stores (+0.2% m/m) were not enough to offset declines.

E-commerce sales declined by 1.2% m/m after two consecutive months of growth.

Statistics Canada’s advance estimate for December suggests that sales were up 1.6%.

Key Implications

Apart from strength in auto sales, this was a softer-than-expected report. Flat goods inflation in November weighed on nominal sales, but even after accounting for price effects, real sales contracted in November.

Despite this, we upgraded our real consumption forecast to 3% in Q4 2024 as a strong flash estimate for December points to a rebound in activity. A parallel report on food services and drinking places suggests that services spending was robust. Moreover, shoppers could have been holding back their purchases in November until the expected GST tax in December (a sizeable decline in beer& wine stores provide good evidence of that).  We estimate that the holiday provided a substantial 8.6% discount on affected items, which suggests that real activity was even stronger than reported in the flash estimate.