MNI: Canada Retail Sales Remained Choppy Through December

Canadian retail sales remained choppy through the end of last year, with a flash estimate showing a 0.5% gain in December following a 0.1% decline in November.

Sales have alternated between gains and losses since August according to Statistics Canada figures published Friday, partly reflecting consumer sensitivity to the Bank of Canada's 4 percentage points of rate increases in 2022. Investors see the Bank hiking another quarter point to 4.5% Wednesday with inflation still more than triple the Bank's 2% target and Governor Tiff Macklem arguing he must pull back demand in an overheated economy and any recession this year will likely be mild.

Retail sales have climbed 5.2% in the 12 months through November, a sign of the economy's momentum. The November figure was also better than the economist consensus for a 0.5% decline. While consumers are burdened by record debts and rapid inflation, some have savings left over from Covid relief checks, unemployment is near a record low and wage gains are picking up.

Statistics Canada also reported the number of people on regular unemployment benefits in November fell to the lowest comparable records began in 1997, except for the Covid shutdown when many people were given other temporary relief checks. 

November's retail sales decline was led by a 1.6% fall at food and beverage stores in a year where those prices showed some of the most dramatic jumps, and a 3.8% fall in building material and gardening stores where purchases are often tied to the cost of credit. Canada's housing market had one of its toughest years in decades in 2022 as higher rates dented what had been a relentless surge in prices. 

The headline retail figure masked a much bigger 1.1% decline in sales excluding autos and gasoline, the biggest setback in 11 months. Gasoline sales rose 2.2% on the month while new car sales rose 1.2%, a sector that's harder to interpret after reports earlier this year of dealerships running out of inventory amid a global microchip shortage.