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Canadian Highlights

• Canada’s data deluge showed a cooling trend in November core inflation, which reinforces the Bank of Canada’s shift to a hold stance.
• Canada’s population saw its steepest decline on record in the third quarter. Weak go-forward population gains should weigh on economic activity and maintain downward pressure on the unemployment rate.
• Canadian home sales and prices had a weak November, but we think 2026 should bring improved fortunes.

U.S. Highlights

• Employment growth slowed in the first two months of the fourth quarter, owing to the impact of deferred resignations on federal government employment.
• Inflation fell sharply in November, but the degree of the descent and the condensed nature of the data collection period warrants caution in interpreting the data.
• Federal Reserve officials continued to voice a spectrum of opinions on the outlook for monetary policy that on aggregate spoke to a cautious approach moving forward.

Canada – A Chilly End to 2025

While the U.S. had a cornucopia of data to whet the appetite, Canada had its own data buffet heading into the holidays. Most important for the Bank of Canada was the inflation report for November which showed a notable cooling in core inflation. Today’s retail spending report was also frosty, confirming a slowing trend in spending volumes. Alongside this, updates on the freeze in population growth, and a chill in housing construction all point to the Bank of Canada staying on the sidelines heading into 2026.

It seems a chilly winter breeze swept through key inflation metrics, as the Bank’s preferred core measures (median and trim) cooled to 2.8% year-on-year (y/y), while the three-month trends were even snowier (Chart 1). Headline inflation, meanwhile, was unchanged with some choppiness on deck for December, as last year’s GST holiday muddies comparisons. However, falling oil prices could offer some offset. Oil slipped again this week, greased by oversupply concerns. However, on-going tensions between the U.S. and oil producer Venezuela limited the extent of the decline.

The inflation report wasn’t all merry, with food prices playing the proverbial grinch. Grocery store prices climbed 4.7% (y/y), harkening back to the bad old days of pandemic inflation. This is something that will catch the eye of policymakers, as higher food prices can impact inflation expectations.

A key piece from the inflation report for the outlook was that rent growth continued to moderate. This is partially a function of the steep slowdown in Canada’s population growth, and this week featured a stark reminder of this trend. Canada’s population growth was downright frosty in the third quarter, slipping 0.2% quarter-on-quarter (Chart 2). This marked the largest decline on record! We anticipate 2026 to be another year of frigid population gains, which should restrain the pace of economic growth. Weak population growth will also weigh on the labour force, which should keep downward pressure on the unemployment rate.

Muted population gains will also drag on housing demand. In this vein, we received November data on Canadian home sales and average home prices this week. Overall, trends were cool, with home sales, average and benchmark prices all slipping a touch. We do, however, expect some improvement in both measures moving forward, benefiting from pent-up demand and amelioration in the Canadian jobs market. In contrast, housing starts popped higher in November but are on a downtrend which should extend into 2026, bogged down by a tepid pace of population gains.

Investors certainly had a lot of data to chew on this week and, all things considered, it was on the cooler end of the spectrum. However, it certainly wasn’t wintry enough to shake the Bank from their current hold stance. Indeed, we think the Bank will keep any changes to its policy rate on ice for the foreseeable future.

U.S. – Data with A Grain of Salt

This was arguably the biggest week for U.S. economic data in several months, as highly anticipated employment and inflation data delayed by the government shutdown was finally released. Financial markets largely took the data in stride, with U.S. Treasury yields falling slightly on the week, while equity markets were roughly unchanged as of the time of writing.

On the data front, the employment report showed that the economy continued to add jobs in the fourth quarter. However, headline job growth was weighed down by a large decrease in federal government jobs in October (Chart 1) - a byproduct of the deferred resignation offers sent out earlier in the year. Despite the near-term distortions, job growth has decelerated through the second half of the year, which has led to an uptick in the unemployment rate and motivated the 75 basis-point reduction in interest rates implemented by the Federal Reserve since September.

The pace of monetary policy easing has been deliberately gradual though, as inflation risks have been rising at the same time. However, November CPI data showed that there may have been a break in this trend in recent months, with the annual percentage change in core inflation falling to 2.6% - the lowest level since March 2021. Given the shorter collection period for this data owing to the government shutdown and the sharp drops recorded in several index categories (Chart 2), this data should be taken with a grain of salt. Market pricing for the Federal Reserve’s January meeting was largely unchanged, with only a 25% chance for a fourth consecutive cut.

The handful of Federal Reserve officials we heard from this week offered notably different assessments on the policy rate outlook. Miran made the case for aggressive rate cuts, positing that inflation metrics were anomalously high, while Waller also took a dovish tone but noted a gradual pace of rate cuts would be warranted going forward. On the other end of the spectrum was Bostic, who voiced greater concern for inflation risks and stated he did not currently see the need for rate cuts in 2026. Other speakers, including Vice Chair Williams, echoed Powell’s comments from his press conference last month that monetary policy was in a good place heading into 2026. Despite growing dissent among FOMC members, the balance of opinion is one of relative caution heading into the new year. Market pricing has followed suit, with another rate cut not expected until the Fed’s meeting in late April next year at the earliest.

Looking ahead to next week, there will be few items on the economic agenda during the holiday shortened week, but the preliminary estimate for third quarter GDP on Tuesday will be a highlight. A strong reading for annualized growth of roughly 3% is expected, which will likely be followed by a deceleration in the fourth quarter owing to the government shutdown. Nevertheless, we expect the economy to grow by 2.2% in 2026, aided by fiscal and monetary policy support.

Summary

United States: More Data, More Questions

• The latest employment and inflation data don't materially change the economic narrative, though they do bring some questions on data quality. Ultimately, the jobs market continues to steadily moderate, and consumer inflation is softening, just not to the degree that the November data suggest. We continue to expect the Fed will hold in January.
• Next week: GDP (Dec 23), Productivity (Jan 8), Employment (Jan 9)

International: Global Central Banks Make Final Rate Calls of 2025

• As 2025 winds down, global central banks remain far from idle. This week, the Bank of Japan raised rates, while the Bank of England and Banxico cut theirs. Most others—including the European Central Bank, Riksbank and Norges Bank—kept rates unchanged.
• Next week: Canada GDP (Dec 23), China PMIs (Dec 31)

Topic of the Week: Federal Employment Nosedives in 2025

• Coming into 2025, there were major questions about how much the incoming Trump administration would reduce the federal workforce. Through November, federal civilian employment has shrunk by 271K since the start of the year, a 10% decline. This represents one of the largest reductions in federal employment in recent memory, and it has reduced nonfarm payroll growth by roughly 23K per month this year.

Full report here. 

• Light agenda in the next couple of weeks before 2026 begins with a bang.
• US data to dominate: ISM PMIs, GDP and NFP reports, plus Fed minutes.
• UK GDP, Tokyo CPI and Eurozone and Australian CPI also on tap.
• But caution likely ahead of Supreme Court tariff ruling and Trump’s Fed pick.

Markets to go into hibernation

The festive period officially starts next week, with many traders vacating their desks until the first full week of January, making way for thin trading volumes and very few top-tier releases. However, plenty of action is expected in the first full week of January 2026 when the US jobs report returns to its usual schedule.

But what are the risks of volatility episodes such as flash crashes or geopolitical flare-ups during these quiet days when any sudden moves could be amplified due to extremely low liquidity?

Holiday lull or a new crisis?

With tensions elevated between the US and Venezuela, further escalation is possible. President Trump could decide to take more action over the country by expanding the military strikes on drug traffickers at sea to Venezuelan land – something he’s already warned about. The US this week imposed a blockade of all sanctioned oil tankers from entering or leaving Venezuela and Trump could well decide to pile yet more pressure on President Madura.

Fresh tensions would probably boost oil prices and to a lesser extent Gold.

There’s also a danger of panic selling on Wall Street if AI jitters persist. Equity markets haven’t staged much of a Santa rally this year despite expectations of more Fed rate cuts. But whilst some valuations are clearly overstretched, the AI revolution is only beginning, hence, new winners could enter the scene just as others unexpectedly become losers in the race.

Still, this year’s slightly prolonged duration of holiday-thin liquidity increases the risk of a negative AI-related headline triggering a new round of selloff in tech stocks if fresh doubt is cast on valuations.

Major decisions awaited at start of 2026

However, investors on the whole will probably prefer to stay on the sidelines, as they await two key decisions in early January. First, the US Supreme Court will deliver its ruling on Trump’s tariffs, ending months of uncertainty about whether most of the levies announced since April are legal or not. However, a ruling against the tariffs may not necessarily be the best outcome, as this could worsen the uncertainty and potentially cost the US government billions if it’s forced to refund the tariff revenue to businesses.

The other big decision is who President Trump will nominate to head the Federal Reserve when Jerome Powell’s term ends in May 2026. Given that Trump keeps changing his mind and there’s a new favourite on a weekly basis, a surprise choice cannot be ruled out. Moreover, picking someone who can achieve consensus within a split FOMC will be crucial. Nevertheless, whoever Trump selects, the new Fed chair will almost certainly be more dovish than Powell, so the announcement is possibly a low-risk event for the markets.

US data to keep markets on edge

Switching the focus to economic data now, the US agenda is by far the busiest. The advance GDP reading for Q3 is the first highlight next week. Due on Tuesday, the report is expected to show that the US economy grew by a solid annualized rate of 3.2% in the third quarter, somewhat slower than the 3.8% seen in Q2. Durable goods orders for October and the latest consumer confidence index are also out the same day.

On Tuesday, December 30, the Fed will publish the minutes of its December policy meeting. With not a whole lot of Fed speakers out and about during the Christmas and New Year period, the minutes will be scrutinized for any clues on the timing of the next Fed rate cut, as well as to see how strong the inflation concerns still run among the policymakers that voted to keep rates on hold.

Moving into January, things will begin to heat up as the ISM manufacturing PMI for December is out on Monday, January 5, followed by the JOLTS job openings, the ADP employment report and ISM services PMI on Wednesday.

NFP report to kickstart the new year

Most important of all, the December jobs report will be released without any delay on Friday, January 9. After the mixed payrolls figures and the much softer-than-expected CPI report for November, any further weakness in the labour market in December would fuel expectations of a January rate cut.

In particular, if the unemployment rate, which hit a four-year high of 4.6% in November, continues to rise, the Fed hawks will find it increasingly tough to defend their stance.

Finally, the University of Michigan’s preliminary consumer sentiment survey for December will also get published on Friday.

For the US dollar, the ISM PMIs and NFP data are likely to have the biggest impact. The risks for the greenback are currently tilted to the downside so a bad set of prints could exacerbate any selling pressure.

Employment numbers are also due in Canada on January 9. The Canadian dollar’s mini rally versus the greenback paused for breath during the past week after the weak November CPI prints. But an upbeat labour market report could recharge the bulls.

Will Tokyo CPI matter after BoJ’s latest move?

As most traders wind down over the long Christmas weekend, it will be business as usual in Japan. December CPI data for the Tokyo region is out on Friday, December 26, along with the November readings for industrial production, retail sales and unemployment.

Following the Bank of Japan’s rate hike in December, the focus is now on how soon the next increase will come. The BoJ will publish the Summary of Opinions of that meeting on Monday, December 29, but before that, any uptick in inflationary pressures could lift BoJ rate hike odds, boosting the yen.

Similarly, investors may want to watch wage growth and household spending numbers that are scheduled for January 8 and 9, respectively.
Australian CPI eyed for RBA clues

Elsewhere in Asia, Chinese manufacturing PMIs out on New Year’s Eve and January 2 might attract some attention for the Australian dollar. But aussie traders will mainly be keeping their eyes on domestic November CPI data due on Wednesday, January 7.

Although the Reserve Bank of Australia is unlikely to announce any changes in policy at its next meeting in February, any fallback in monthly CPI, which unexpectedly jumped to 3.8% y/y in October, could push back the timing of a potential rate hike, weighing on the aussie.
Euro and Pound might shrug off the data

In Europe, it will be extremely quiet apart from Q3 GDP figures out of the UK this Monday, and the Eurozone’s flash CPI estimate for December on Wednesday, January 7.

With both the Bank of England and European Central Bank having just held their last policy decisions of the year, neither release is likely to move the euro and pound.

The ECB is firmly on pause at least until the middle of 2026, while any disappointing growth numbers for the UK may not be enough to significantly alter the BoE rate outlook after the Bank delivered a surprise hawkish cut.

Canada’s gross domestic product report for October on Tuesday will mark Statistics Canada’s final major data release of 2025, and we anticipate a 0.2% decline in growth.

It’s slightly higher than StatsCan’s preliminary estimate released a month earlier for a 0.3% contraction. If October’s decline is realized, it would represent the steepest monthly drop in GDP since February.

Still, early indicators such as hours worked and our tracking of consumer spending suggest a possible recovery in November. We continue to expect a soft 0.5% annualized increase in GDP for Q4.

In October, we see weakness mostly from goods-producing sectors, while output among service industries remained essentially unchanged.

Non-conventional oil production in Alberta contracted sharply (-5%) in October after four consecutive months of expansion. Manufacturing output declined as well, partially reversing September’s gains. StatsCan’s October mineral production data indicated modest recovery in mining output, following declines in the prior two months, helping to cushion some weaknesses in other sectors.

For services, home resales rose 0.8% month-over-month in October, bolstering real estate activity. Arts and entertainment saw a boost from the Blue Jays’ playoff run, although the gain was likely reversed quickly in November. Offsetting stronger activities was the Alberta’s teacher strike temporarily weighing on education services. Wholesale and retail volumes also fell, by 0.7% and 0.6% respectively.

Early November indicators suggest signs of stabilization. Hours worked increased a larger 0.4%, and our tracking of RBC consumer spending data indicates continued strength, especially in discretionary purchases as the holiday shopping season ramps up. This is consistent with StatsCan’s advance retail indicator, which shows sales rebounded by 1.2% in November. Overall, we continue to expect modest growth in Q4.

Week ahead data watch:

Delayed Q3 U.S. GDP report will be released on Tuesday after the U.S. government shutdown. We look for headline GDP growth of an annualized 2.5% quarter-over-quarter—a deceleration from Q2’s 3.8%. Much of Q3’s expansion was driven by household consumption, particularly within services. Excluding volatile net trade, final domestic demand likely remained resilient, albeit growing slightly slower than in Q2.

The last week before Christmas is usually a big central bank week and this year was no exception with central bank meetings in the euro zone, UK, Japan, Norway and Sweden (plus a few others). Most interesting was the ECB meeting. While they kept rates unchanged as expected, the ECB revised up projections for both GDP growth as well as inflation. ECB president Lagarde signalled a neutral outlook for rates at the press conference, though, and bond yields ended broadly unchanged after a short initial spike. The Bank of England delivered a rate cut of 25bp as expected, while Bank of Japan went the other way and raised rates 25bp. They also come from different starting points with rates in Japan now at 0.75% while the cut in UK moved rates to 3.75%. Both Norges Bank and the Riksbank left rates unchanged as expected.

On the data front, Euro zone indicators softened in November with a small decline in the composite PMI from 52.8 to 51.9 (consensus 52.6) and a similar move lower in the German ifo business confidence. The pace of growth thus seemed to moderate a bit towards the end of 2025, but the indicators still underpin continued cruising speed growth in line with our expectations for 2026.

In the US, the most noteworthy data was inflation for November, which showed a big drop to 2.6% y/y from 3.0% y/y in September (inflation for October was not recorded due to the US government shutdown). The data may have been distorted by the shutdown, though. US also released the employment report, which was a mixed bag. The employment picture looked better with job gains around 75k over the past three months outside the government sector, while the unemployment rate increased to the highest level in four years at 4.6%. The increase was due to a lift in the labour force, though. With US GDP growth being robust above 3% in the second half of 2025, we expect the labour market to improve moderately going into 2026. US retail sales showed continued brisk consumer spending with a rise of 0.8% m/m in core sales in November. The data support continued moderate easing by the Fed, and we still look for rate cuts in March and June. It is broadly in line with market pricing, although the market sees the cuts stretched out over a longer period to September.

In the German bond market, upward pressure continued on 30-year bond yields related to changing regulation for Dutch pension funds and record German issuance outlook, while we saw a moderate decline in the short end. US yields traded slightly lower during the week. Equities were on the backfoot the whole week as AI bubble concerns lingered. We continue to see the macro environment as benign for equities in coming quarters with US growth being solid and the euro zone cruising ahead but occasional wobbles related to AI concerns will likely continue given the stretched valuations.

The next interesting data will come on the other side of Christmas with Japanese inflation on 26 December, Chinese PMI on 31 December, Euro Flash CPI on 7 January and the US employment report on 9 January.

Full report in PDF. 

Markets

Bear steepening is again name of the game today. Two events triggered the selling pressure in core bonds with the long end of the curves underperforming. First there’s the continuation of the Bank of Japan’s policy normalization. The US trade war interfered with the central bank’s semi-annual rate hikes, but with uncertainty reduced and underlying inflation still running above the 2% target, the BoJ picked up where it left things in January. At 0.75%, the policy rate reached its highest level since 1995 with governor Ueda readying more moves in 2026 (“some distance from lower end of neutral range”). The next step higher is discounted by the July policy meeting. Higher Japanese (bond) yields have global implications. By closing the gap with interest rate levels in other parts of the world, there’s an increasing risk of a JPY carry trade unwind with money flowing back into Japan(ese) assets. The Japanese yen is exception to the rule today with USD/JPY surging from 155.70 to 157.30. The Japanese 10-yr yield breached 2% to trade at its highest level since 1999, making JGB’s starting to look attractive after all those years. The Japanese 30-yr yield (3.42%) sits only 10 bps below the German one. Together with the post-Covid monetary framework, there’s the return of risk premia embedded in the long end of the curve as central bank’s unwind their QE-portfolios. Fiscal policy as the new dominant market force is one of our hallmarks together with the notion that Europe will become more reliant on joint debt issuance as a means to prevent a repeat of the 2010-2011 crisis. What started with temporary unemployment support (SURE) and recovery programs during COVID, evolved via upped defense spending to keep the NATO alliance alive and now returns via the €90bn financial loan to Ukraine (which will be borrowed against the bloc’s shared budget). Daily changes on the German yield curve range between + 1 bp (2-yr) and +5 bps (30-yr). The 30-yr yield trades above 3.5% for the first time since 2011. The swap curve moves in parallel fashion with the 10y swap rate testing the 2024 top at 2.95% and the 30y testing the 2023 top at 3.27%. Despite everything what’s going on at bond markets, EUR/USD is unfazed at 1.1720. Changes on stock markets are also minimal.

News & Views

The German Bundesbank today gave a balanced update on its forecasts for the domestic economy. Expected growth for 2026 was slightly downwardly revised to 0.6% (from 0.7% in June). There are signs of an increase in government orders, but it only expects the expansionary spending stance to bolster economic growth more significantly from later on next year. Aside from government spending, the BuBa also expects a resurgence in exports. It sees growth (wda) at 1.3% in 2027 and 1.1% in 2028. The expansionary fiscal policy will only have a limited impact on potential output of the economy (0.4% until 2028) as broader structural reforms are needed. Inflation will decline a little more slowly in the coming years mainly due to expected high wage growth. The Buba sees HICP inflation easing from 2.3% this year to 2.2% next year to reach around 2% in 2027 & 28. Additional spending on defense and infrastructure, tax cuts and larger transfers will be reflected in higher government debt in the coming years. The government deficit ratio will reach 4.8% in 2028, while the debt ratio will have risen to 68%.

Belgian business confidence showed a sharp drop this month (from -8.2 to -11.9). It weakened across all sectors except business-related services. The decline in the trade sector accelerated (-11.8 from -8.9) as business leaders expect demand to drop further and intend to significantly scale back their orders with suppliers. Manufacturing showed a more pessimistic assessment of total order books, employment and demand conditions. Weaker building confidence is due to reduced equipment use and a drop in the order position. Belgian consumer confidence, published yesterday, receded from 2 to -1 after rising since May. There was a particularly sharp downturn in households’ savings intentions (20 from 26). More modest declines were registered for the economic situation in Belgium (-28 from -26), the financial situation of households (-3 from 0) and unemployment.

EURJPY hit new record high following 1.1% advance in post BoJ rate decision trading.
Japanese yen weakened across the board after the Bank of Japan raised interest rates by 25 basis points to 0.75% (the highest in three decades) and left the door opened for further tightening.

The pair is in steep ascend in past 10 months, which is the part of larger uptrend since mid-2020, with today’s move, marking the biggest daily gain since Apr 7.

Fresh move into uncharted territory eyes targets at 185.00 (round figure) and 185.93 (Fibo 150% projection of the rally from 154.40), though shallow correction should be anticipated as daily RSI is approaching overbought territory.

Dips should ideally find firm ground above 183.00 support zone, to mark positioning for fresh push higher.

Only break and close below 182.00 zone (today’s low / rising 10DMA) would sideline bulls.

Res: 185.00; 185.93; 187.00; 188.41
Sup: 184.00; 183.15; 182.20; 181.70

On 4 December, while analysing the XNG/USD chart, we highlighted the rally in natural gas prices towards a three-year high and noted that the price had entered a resistance zone formed by:

→ the upper boundary of a broad descending channel (shown in red);

→ the $4.800/MMBtu level, near which a peak was formed in March;

→ the psychological $5.000/MMBtu mark.

As indicated by the arrow:

→ this resistance cluster proved effective, and after an attempt to break above the $5.000 psychological level, the uptrend reached its climax;

→ following the appearance of a bearish gap on 8 December, selling pressure took control, leading to a break below the orange ascending trend line and a decline in US natural gas prices.

From a fundamental perspective, the pullback has been driven by several factors:

→ Seasonality. Weather forecasts for the US holiday period point to above-average temperatures, reducing demand for heating and power generation.

→ Rising production. According to Trading Economics, natural gas output in the continental United States reached 109.7 billion cubic feet per day in December, maintaining the record levels seen in November. In addition, EIA data show that gas inventories remain 0.9% above the current five-year average.

It is worth noting that today natural gas prices are trading:

→ near a support zone created by the bullish gap formed in the second half of October;

→ close to the median of the aforementioned descending channel, an area where supply and demand often come back into balance.

Taking this into account, it is reasonable to assume that:

→ after a sharp drop of around 30% from the early-December peak, sellers may look to lock in profits ahead of the holidays;

→ the market could enter a consolidation phase.

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Market Picture

The crypto market set another trap for bulls yesterday afternoon, jumping to $3T and then falling to $2.85T. However, on Friday morning, it is once again flirting with buyers, trading at the same level of $2.95T, where it has remained since the beginning of the week.

On Thursday, Bitcoin replayed Wednesday’s micro-drama, soaring towards $90K, only to soon fall below its previous local lows. As a result, by the end of the day, the intraday low had fallen back to $84K, which we last saw almost five weeks ago. However, on Friday morning, the price is back at the $87K level, around which it has been trading for the last four days.

Although Bitcoin has buyers stopping really sharp declines, other top altcoins are gradually drifting down. It appears that large holders have been quietly exiting them over the last three to five months. This is clearly visible in Ethereum, XRP, and Solana. Zcash, in its traditional manner, soars sharply on signs of a reversal in larger coins, but then falls just as dramatically.

News background

The options market is hedging against the risk of Bitcoin falling below $85K, according to Derive.xyz. Market participants anticipate an increase in volatility at the end of the year. The situation is exacerbated by unstable inflows into ETFs and a decline in liquidity ahead of the holidays.

BTC’s growth is also being hindered by investor doubts about the return on investment in the American artificial intelligence (AI) sector, amid a liquidity shortage. Bitcoin’s correlation with the Nasdaq has strengthened due to the influx of large investors.

BitcoinForCorporations predicts an outflow of up to $15 billion from DAT companies accumulating cryptocurrency if MSCI decides to exclude them from its indices. Eighteen firms are at risk of exclusion.

In 2025, Bitcoin’s volatility was lower than that of Nvidia’s shares, according to Bitwise. The emergence of spot ETFs and other traditional instruments caused the ‘fundamental reduction in risk’ of the asset.

An increase in the number of users and an expansion of the gas limit has led to the ‘inflation’ of the Ethereum blockchain, which negatively affects the operation of nodes, warned the Ethereum Foundation (EF) team, proposing several possible solutions. Ethereum co-founder Vitalik Buterin called for Ethereum to be simplified. In his opinion, the complexity of using the ecosystem of the second-largest cryptocurrency by capitalisation hinders its mass adoption.

Retail sales declined for a second consecutive month in October, slipping 0.2% month-on-month (m/m), undershooting Statistics Canada's advanced estimate for a flat reading. After adjusting for inflation, sales volumes fell a steeper 0.6% m/m.

Auto sales partially reversed September's losses, rising 0.6% m/m in October.

Receipts at gas stations and fuel vendors fell 0.8% m/m, driven by weaker demand, with volumes also down 0.9% m/m.

Core sales – excluding auto sales and receipts at gas stations – were weak for a second straight month, declining 0.5% m/m.

• Weakness was concentrated in food and beverage stores (-2.0% m/m) with more than a 10.6% drop at beer, wine and liquor retailers coinciding with a labour dispute in British Columbia. Sales at clothing and clothing accessories (-0.7% m/m) and health and personal care stores (-0.3% m/m) also fell in October.
• Gains at furniture, home furnishings stores (+2.3% m/m) partially offset the weakness.

E-commerce sales declined by 0.3% m/m in October.

Statistics Canada's advanced estimate points to a rebound with 1.2% gain in November.

Key Implications

The holiday shopping season got off to a flat start. Despite November's rebound, the underlying trend in real sales remains negative. Only a handful of discretionary categories – clothing and electronics – continue to show positive momentum. This lines up with our TD credit & debit card data, which show relatively resilient services spending growth outpacing goods

Looking ahead, our outlook for Q4 real consumption growth remains subdued, tracking close to 1.0% (quarter-on-quarter, annualized). This below-trend pace is consistent with the Bank of Canada’s assessment that the economy is still working to gain traction and that monetary policy is appropriately positioned.