Canadian retail sales rose a modest 0.2% month-on-month in September, a tick ahead of market expectations. Looking through price changes, it was a more encouraging story as the volume of goods sold rose 0.5%.
The two largest sales categories led the way: motor vehicle and parts dealers saw sales grow 0.5% month-on-month (volumes: +1%), while food and beverage stores reported a 0.9% gain (0.8% in volume terms). Softness was observed in gasoline stations (-1.1%) but this was due largely to price effects as sales volumes were down a modest 0.2%. Notable for its housing activity implications, building material/garden equipment stores reported declines again in September (-1.9% in both dollar and volume terms).
Looking across the provinces, it was a generally positive month. The three largest provinces (Ontario, Quebec, British Columbia) reported more or less flat sales, while solid growth was recorded in Alberta (+0.5%), Saskatchewan (+1.7%), and Manitoba (+1.5%). Sales activity was mixed across the Atlantic provinces.
Key Implications
Decent. September’s data paints a picture of a still-resilient consumer, particularly once the impact of falling gas prices are removed from the picture. Canadians showed a bit of confidence heading into the fall, still willing to commit to auto purchases even as borrowing costs have marched upward. If there is a fly in the ointment, it is in the housing related sectors, such as furniture/home furnishings, and building material stores, which have displayed persistent weakness since mid-year.
This is the last major piece of data before next Friday’s quarterly GDP figures. Our final read is that the Canadian economy likely turned in a not-too-hot, not-too-cold 1.8% annualized pace of growth. This aligns with the Bank of Canada’s expectations, and together with the current challenges facing the oil patch, rules out another hike in December. Instead, all eyes are likely to be closely trained to how the Bank is viewing the impacts of energy price moves and the implication for the pace of hikes thereafter when it releases its decision on December 5th.
