Canadian Retail Sales up 1.4% in January

Canadian retail sales rose in January, a sign of consumer strength even as inflation continued to push prices higher. Statistics Canada said retail sales rose 1.4% to $66.4 billion for the first month of 2023, buoyed by gains at motor vehicle and parts dealers as well as gas stations. The result beat the agency’s early estimate for the month, which had suggested a gain of 0.7% in January.

“Consumers started the new year on a stronger footing,” Ksenia Bushmeneva, an economist with TD Economics, said in a client note. “A better-than-expected end of 2022 and the start of 2023 has led to upgrades in our consumer spending outlook for the first half of this year.”

But Statistics Canada said its initial estimate for February points to a 0.6% decline for the month. Though the agency cautioned the early figure would be revised, it suggests consumer resiliency despite higher interest rates and inflation could be wearing thin.

Indeed, debt servicing costs have been moving higher and “much of the pain from higher interest rates on household finances is yet to come,” Ms. Bushmeneva said. “As such, we continue to expect consumer spending to slow significantly in the second half of this year as this headwind intensifies and the labour market slows,” she said.

For January, sales at motor vehicle and parts dealers gained 3.0%, led by higher sales at new car dealers which rose 3.0%. Meanwhile, sales at gasoline stations and fuel vendors increased 2.9% as sales in volume terms fell, but gasoline prices rose.

Core retail sales – which exclude gasoline stations and fuel vendors and motor vehicle and parts dealers – rose 0.5% for the month with food and beverage retailers leading the increase. Sales at beer, wine and liquor retailers were up 2.3%, convenience retailers and vending machine operators recorded a 6% increase in sales and sales at specialty food retailers climbed 3.3%.

Also contributing to the increase in core retail sales in January were higher sales at clothing, clothing accessories, shoes, jewellery, luggage and leather goods retailers, up 1.8% compared with the same month last year, Statistics Canada said. The increase was led by a 2.2% hike in sales at clothing and clothing accessories retailers – the largest increase since February, 2022. Building material and garden equipment and supplies dealers also saw an increase of 1.5%. 

Sales at sporting goods, hobby, musical instrument, book, and miscellaneous retailers dropped 1.2%, the largest decline to core retail sales for the month. Sales declined in the subsector for five of the seven months preceding January, the agency said.

In volume terms, retail sales rose 1.5% in January.

Source: Globe and Mail
Source: Statistics Canada

Economy grew 0.5% in January, Statistics Canada reports

Economic growth resumed in January and came in better than first expected following a small contraction in December, Statistics Canada said. Real gross domestic product rose 0.5% to start the year, the agency said, beating its initial estimate for a gain of 0.3% for the month and reversing a contraction of 0.1% in the final month of 2022.

Statistics Canada also said its initial estimate for February indicates growth continued with a gain of 0.3%, though it cautioned the figure will be updated. 

“There were many indications that the economy got off to a solid start in 2023, but today’s double-barrelled blast of strength is well above even the most optimistic views,” BMO chief economist Douglas Porter wrote in a report. “Even if growth stalls in March, it now looks like Q1 will post growth of 2.5%, up from a flat read in Q4. While we continue to look for a notable cooldown in the next two quarters, we are bumping up our GDP growth estimate for all of 2023 by three ticks to 1.0%.”

The growth in January came as goods-producing industries gained 0.4% for the month, while services-producing industries rose 0.6%.

Statistics Canada said many of the main drivers for growth in January also contributed the most to the decline in December. The wholesale trade, transportation and warehousing, and mining, quarrying and oil and gas extraction sectors all rebounded after falling in the previous month.

Wholesale trade gained 1.8% in January, helped by wholesalers of machinery, equipment and supplies, while the mining, quarrying and oil and gas extraction sector grew 1.1% after falling 3.3% in December. The transportation and warehousing sector added 1.9% in January, more than offsetting a drop of 1.1% in December that was due in part to bad weather.

Despite the early show of strength, financial analysts expect the economy to slow over the course of the year. The consensus assumption on Bay Street is that Canada will enter a mild recession later in 2023, as businesses and consumers experience the full effects of rapid interest-rate hikes. Analysts expect that the Bank of Canada is likely to hold its benchmark interest rate steady at the next decision on April 12.

Source: The Star
Source: Globe and Mail
Source: Financial Post
Source: Statistics Canada