• Retail sales unchanged in December – capping a soft year in 2019
  • E-commerce sales (not all of which are counted in the retail sales total) surged higher

Canadian retail sales ended 2019 about where they ended 2018. Excluding price increases, sale volumes in December were up just 0.1% from a year prior. Sales on a month-over-month basis were unchanged from November, both including and excluding prices, leaving overall consumer spending on track to post another lackluster increase in Q4 of last year – and in line with our expectation that overall GDP increased little if at all in the quarter.

There are legitimate questions about how accurately retail sales are really capturing consumer spending trends. Services are not included. Not all e-commerce sales are captured in headline retail sales , and e-commerce sales were up a whopping 31.5% from a year ago in December (likely in part reflecting the fact that cyber-Monday fell in December rather than November this year.) And that doesn’t include ‘non-Canadian’ online retailers. Still, consumer spending growth has, at the least, under-performed stronger labour market conditions, and resilient consumer confidence indicators. The lagged impact of earlier interest rate hikes cutting into household spending power likely is part of the explanation, and also helps to explain why household insolvency rates edged higher last year. Borrowing rates have since pulled back again, which could ease some near-term pressure on households. But overall economic growth will also likely be weighed down early in 2020 by another bout of transitory disruptions, in this case potential spillovers from the COVID-19 outbreak in China and ongoing disruptions to rail transportation. We think the Bank of Canada will ultimately look through most of those transitory disruptions, but underlying growth trends have also been softer, and we continue to pencil in a rate cut from the central bank in April.

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