Following two months of declines, retail sales edged up 0.1% in September. However, in real terms, the declines continued, with sales volumes down 0.6% during the month.
The key driver behind the overall increase in September was higher sales at gasoline stations (+2.6%), due to rising prices caused by Hurricane Harvey. Volumes of gas station sales were actually down 2.5%. Elsewhere, sales tied to housing activity including furniture (+2.3%) and building material and garden equipment (+2.6%) stores were up, while most other industries recorded a decline during the month.
Regionally, the story was a mixed bag, with sales up in half the provinces. Ontario (+0.5%) recorded the largest gain in dollar terms thanks to higher gas station sales, while BC (+0.4%), Alberta (+0.3%) New Brunswick (+2.1%) and Newfoundland and Labrador (+1.8%) were also up during the month.
Key Implications
After a strong first half of the year, consumers took a breather in the third quarter, with retail sales volumes down 0.4% over the three month period. This suggests a deceleration GDP growth during the quarter from its earlier breakneck pace, with our tracking currently sitting below 2%. The soft handoff also reduces momentum heading into the fourth quarter.
Consumer spending has been a key driver of economic growth this year and while a more sustainable rate of growth is likely, it should remain a key support going forward. Indeed, some improvement in retail sales could be in the cards, in line with the uptick in housing market activity and a strong labour market.
Today’s data is in line with the slowing in economic activity expected by the Bank of Canada. We continue to expect the Bank to remain on hold in December, before taking rates higher in early-2018.
