Canadian retail sales fell 0.1% to $61.8-billion in November as rising cost of living continued to weigh

Canadian retail sales edged down in November amid a broad consumer spending pull back as the rising cost of living continued to erode purchasing power. Statistics Canada said that retail sales dropped 0.1% to $61.8 billion in November.

While the decrease wasn’t as pronounced as expected — the agency’s early estimate for the month predicted a 0.5% drop — other measures show a bigger drop. Retail sales in volume terms, decreased 0.4% in November. Core retail sales, which exclude gasoline stations and motor vehicle and parts dealers, dropped 1.1% — the largest decline in 11 months.

Still, the federal agency’s early estimate for December suggests retail sales rebounded slightly up 0.5% for that month, though it cautioned the figure would be revised.

“Canadian consumers continue to prove resilient in the face of aggressive rate hikes,” BMO economist Shelly Kaushik said in a client note. “Retail sales came in better than expected in November, with the headline decrease helped by higher prices as volumes posted a larger drop.”

Meanwhile, retail sales decreased in six of 11 sub-sectors, representing 47.4% of retail trade, Statistics Canada said. The decrease was led by lower sales at building material and garden equipment and supplies dealers, down 3.8% from the previous month, and food and beverage stores, down 1.6%.

Supermarkets and other grocery stores, excluding convenience stores, saw sales slump 1.3% in November — a month when prices of food purchased from stores rose 11.4% on a year-over-year basis, the agency said. Sales at general merchandise stores fell 0.8%, a significant drop given one of the largest shopping events of the year — Black Friday — is in November.

Retail e-commerce sales were down 2.7% in November on a seasonally adjusted basis.

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

U.S. Retail Sales Tumble in December; Monthly Producer Prices Fall

U.S. retail sales fell more than expected in December, pulled down by declines in purchases of motor vehicles and a range of other goods, putting consumer spending and the overall economy on a weaker growth path heading into 2023.

“Weak retail sales in December show consumers are likely retrenching during a time of economic uncertainty,” said Jeffrey Roach, chief economist at LPL Financial in Charlotte, N.C. “The trajectory for the U.S. economy is weakening and recession risks are rising for 2023.”

Retail sales fell 1.1% in December. Data for November was revised to show sales dropping 1.0% instead of 0.6% as previously reported. It was the second straight monthly decline. Retail sales rose 6.0% year-on-year in December.

Retail sales are mostly goods and are not adjusted for inflation. December’s decline in sales was likely in part the result of goods prices falling during the month. Holiday shopping was also pulled forward into October as inflation-weary consumers took advantage of discounts offered by retailers.

Higher borrowing costs as the Federal Reserve battles inflation are also weighing on retail sales as goods tend to be financed on credit. Retail sales were also likely hurt by a cold snap in December as well as lower gasoline prices, which impacted on receipts at service stations.

In addition, spending is shifting back to services.
Online retail sales dropped 1.1%. Furniture stores sales plummeted 2.5%.  Electronics and appliance store sales declined 1.1%. There were also decreases in receipts at general merchandise stores. However, receipts at building material and garden equipment suppliers rose 0.3%.

Excluding automobiles, gasoline, building materials and food services, retail sales fell 0.7% in December. Data for November was unrevised to show these so-called core retail sales sliding 0.2% as previously reported.

Core retail sales correspond most closely with the consumer spending component of gross domestic product. The weakness in core retail sales is likely to be offset by anticipated gains in services spending. Consumer spending continues to be underpinned by labour market tightness, which is keeping wages elevated.

With inflation adjusted consumer spending increasing 0.5% in October and being unchanged in November, economists believe growth in overall consumer spending in the fourth quarter would exceed the 2.3% annualized rate logged in the third quarter.

Gross domestic product growth estimates for the October-December quarter are as high as a 4.1% rate, also reflecting the sharpest contraction in the trade deficit in November since early 2009. The economy grew at a 3.2% rate in the third quarter.

Nevertheless, consumer spending and the overall economy are entering 2023 with less momentum. Savings are also dwindling.

Most economists expect the economy will slip into recession by the second half of 2023, though there is cautious hope that moderating inflation could discourage the Fed from raising interest rates significantly higher. This would result in growth only slowing sharply rather than the economy contracting.

News on inflation continued to be encouraging. A separate report from the Labour Department showed the producer price index for final demand decreased 0.5% in December after rising 0.2% in November.

In the 12 months through December, the PPI increased 6.2% after climbing 7.3% in November. Economists had forecast the PPI dipping 0.1% on the month and gaining 6.8% year-on-year.

The report came on the heels of reports that monthly consumer prices fell for the first time in more than 2½ years in December. A 1.6% decline in the prices of goods accounted for the drop in the PPI. Goods, which gained 0.1% in November, were pulled down by a 7.9% plunge in energy and a 1.2% drop in food prices. Services prices edged up 0.1% after rising 0.2% in November.

Excluding the volatile food, energy and trade services components, producer prices gained 0.1% in December. The core PPI advanced 0.3% in November. In the 12 months through December, the core PPI rose 4.6% after increasing 4.9% in November.

Source: The Globe and Mail