• Canadian retail sales were flat in December (0.0% m/m), following an upwardly revised 1.1% increase in November (previously reported as 0.9%). The release came close to consensus expectations for a modest 0.1% uptick.
  • The picture was similar after stripping out price impacts, with retail sales volumes also flat on the month (0%).
  • Retail sales were up in seven of the 11 major categories. The lackluster print was driven primarily by weak sales in the volatile autos and parts (-1.3%) and gasoline stations (-2.3%) categories. Indeed, excluding these two volatile categories, retail sales were up 1.0% on the month.
  • Providing some offset to weaker auto and gasoline sales were stronger sales at building material and garden equipment stores (+3.8%) and health and personal care stores (+1.4%).
  • Regionally, sales were up in eight of the 10 provinces. Sales were notably weak in Quebec (-1.4%). Providing the most offset to the headline print were decent sales in Ontario (+0.4%) and Alberta (+1%).

Key Implications

  • December’s print caps off the worst yearly performance for Canadian retail sales since 2009. Indeed, for the year as a whole, nominal sales were up just 1.6%, with volumes barely eking out any growth (0.4%).This is particularly disappointing in the context of surging population growth seen across Canada this year.
  • In terms of growth implications, we maintain our view that the Canadian economy likely hit a standstill in the fourth quarter of last year. What is more, December’s weak retail sales print, combined with other recent lackluster releases (for example, manufacturing sales) provide a soft handoff to 2020. The only factors providing some relief in December’s data are the concentration of the weakness in a small number of provinces and spending categories, and the modest upward revisions to the prior month.
  • We’ve been getting mixed signals on drivers of consumer spending of late. Healthy labour market and wage gains, and a recovering housing market should provide a lift to consumer spending. However, the sector remains caught between these tailwinds and rising household debt servicing costs. Consumer spending is one area that the Bank of Canada has been watching closely and the persistence of recent soft trends makes a rate cut more likely.


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