The story behind Canada’s December retail slump

By Staff, with files from The Canadian Press | February 22, 2018 | Last updated on February 22, 2018
2 min read

Statistics Canada says retail sales fell 0.8% in December to $49.6 billion, as gains in new car sales were more than offset by lower sales at electronics and appliance stores and general merchandise retailers.

Sales at general merchandise stores fell 5.3% in December while health and personal care stores dropped 3.8%.

Electronics and appliance stores were down 9.1% in the month, following a 12.7% increase in November when sales were boosted by Black Friday sales and new product releases.

Meanwhile, motor vehicle and parts dealers posted a 2.1% increase in December, boosted by a 2.9% increase at new car dealers.

Read: Widespread growth—including in financial services—boosts GDP

Excluding motor vehicle and parts dealers, retail sales dropped 1.8%.

Economists had expected an overall increase of 0.2% and 0.3%, excluding autos, according to Thomson Reuters.

Derek Holt, vice-president of Scotiabank Economics, blamed the numbers on increased November shopping and bad December weather.

“I can’t reconcile the widespread weakness in this report with the rest of the underlying fundamentals influencing the Canadian consumer that saw a massive acceleration of job gains into year-end and strong income growth,” he wrote in a research note.

“Overall, I would think the BoC cautiously looks through this report,” Holt wrote.

Holt’s model-based tracking estimate for December GDP is somewhere between no growth and 0.1% growth month over month. “I would still think that the risks are skewed to growth falling short of BoC expectations for next Friday’s Q4 GDP growth,” he wrote.

Andrew Grantham, senior economist at CIBC Capital Markets, also attributed the “deep freeze” in December retail to Black Friday pulling more shopping to November.

“That is something the seasonal factors and consensus expectations haven’t caught onto yet,” he wrote in a research note. “However, averaging November and December together, sales were slightly lower over the period, and the December result will still weigh on expectations for monthly GDP and BoC policy tightening.”

Read the Scotiabank report here and the CIBC report here.

Also read: Canadian wholesale numbers down slightly in December

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Staff, with files from The Canadian Press

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