Retail Sales in Canada: October Update
By Promit Mukherjee
OTTAWA (Reuters) – Canada's retail sales in October were marginally lower than expected, with a notable increase in new car sales compensating for decreased purchases at supermarkets, grocery stores, and wine shops. According to Statistics Canada, retail sales, covering motor vehicles, clothing, furniture, food and beverages, among other categories, grew by 0.6% in October, with sales rising in five out of nine subsectors.
Following October's data, preliminary estimates for November suggest that retail sales might remain flat, based on surveys from only half of the respondents. Retail sales act as an early indicator of GDP growth, contributing nearly 40% to total consumer spending, which significantly supported Canada’s economic growth in the third quarter.
The economy saw a growth rate of just 1% in Q3, falling short of the Bank of Canada's expectations, and early forecasts indicate that Q4 GDP may also underperform their 2% target. The GDP numbers for October are set to be released the following week.
Analysts had predicted a 0.7% growth in sales for October, with an estimate of 0.5% growth excluding automotive and parts. When removing the automotive sector, which represents over a quarter of total retail trade, sales rose only 0.1%. The slight increase in October retail sales brought the total value to C$67.58 billion ($46.97 billion), though the volume remained unchanged.
BMO Capital Markets economist Shelly Kaushik commented on the stalled retail spending as the fourth quarter commenced. Economists suggested that a potential flat sales report for November might be influenced by an upcoming two-month sales tax holiday beginning mid-December, leading customers to delay purchases rather than indicating a declining trend.
In early trading, the Canadian dollar remained stable, increasing by 0.06% to 69.5 U.S. cents, equating to 1.4389 against the U.S. dollar.
Sales of motor vehicles and parts, prone to volatility, rose by 2%, with new car sales experiencing a 2.5% rise. Conversely, food and beverage sales, comprising about one-fifth of retail trade, saw a 0.7% decline due to lower supermarket sales.
> Note: ($1 = 1.4389 Canadian dollars)
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