Canadian retail sales advanced 0.3% m/m in October, a slight improvement over last month’s revised 0.1% release (previously reported as 0.2%). This came against consensus expectations of a 0.5% increase. Disappointingly, accounting for price changes reveals a flat volumes print.
The uptick was mostly led by increases in sales at motor vehicles and parts dealers, up an impressive 1.3% on the month (+0.6% in real terms). Sales at gasoline stations also advanced 1.9% in both nominal and real terms. Excluding those two volatile categories, retail sales were down 0.4%.
This was the first month in which cannabis stores were incorporated in retail trade data. Partly due to this, sales at miscellaneous stores recorded a strong 4.5% increase. Excluding cannabis, sales in this category were up 1.1%.
Consistent with slowing housing market data (especially resales), furniture and home furnishing stores saw declines of 1.5% (-1.8% in real terms). Building materials and gardening equipment stores also reflected of housing market softness, falling 0.9% (-1.4% in real terms).
Regionally, retail sales were mixed, increasing in only 5 out of 10 provinces. Notable increases were seen in Ontario (+1.1%) and Quebec (+0.8%). Sales declined in Alberta for the third consecutive month (-1.8%). Performance across the Atlantic provinces was mixed.
Key Implications
The release is relatively disappointing given the flat volumes print. To make matters worse, last month’s print was revised slightly downwards. Nevertheless, it likely doesn’t change much, especially given today’s solid real GDP data. The retail picture, however, remains that of moderating consumer spending.
Housing market weakness continues to reflect in lower sales at home, furniture, and gardening stores. What’s puzzling, however, is that rising borrowing costs have only sent auto sales sideways, with no major downturn as of yet.
Going forward, healthy labour markets and wages will likely be slightly offset by the impact of rising borrowing and debt service costs. This is likely to shift growth slightly away from consumer spending to investment going forward, in line with the Bank of Canada’s expectations (and ours).
