Retail sales in Canada rose 0.4 percent to $66.9 billion in September, with an increase in six of the nine subsectors, led by food and beverage traders. Core retail sales, which exclude petrol stations and car and parts dealers, increased by 1.4% during the same month.
In terms of volume, retail sales saw a 0.8% increase in September. In the third quarter, retail sales increased by 0.9%, while recording a 1.3% increase in volume.
After a 0.5% decline in August, core retail sales returned to a 1.4% rise in September, driven by increased sales in the F&B segment (+3.0%). Supermarkets and other grocery retailers led the increases, rising 3.3% after a 1.9% decline in August. Higher revenues from beer, wine and liquor merchants (+4.4%) also contributed to the sector’s strength.
Traders of building materials, garden equipment and supplies also recorded a 3.0% increase in sales. However, only decline in core retail sales during September was for apparel and accessories retailers, with sales down 0.8%.
In terms of petrol stations and fuel vendors, the largest decline in sales was recorded at 2.3%, the fifth consecutive decline. However, sales at petrol stations increased by volume by 3.2%. Sales of car and parts dealers decreased by 0.7%, with sales at new car dealers down by 0.7% and used car dealers by 5.2%. However, some of these declines were offset by increased sales at auto parts and accessories dealers (+4.2%).
Five counties saw a rise in retail sales in September, with the largest increase observed in Alberta (+2.3%), driven by increased sales of auto and parts dealers. In Quebec, sales rose 0.6%, while Montreal metropolitan area recorded an increase of 0.3%. Ontario recorded the largest regional decline in retail sales at -0.1%, due to lower sales at auto and parts dealers.
How are changes in retail sales affecting the Canadian economy?
Changes in retail sales have a significant impact on the Canadian economy in different ways. Here are some of the main impacts:
- Consumer spending
A key component of GDP: Retail sales are a key part of consumer spending, which makes up a large portion of Canadian GDP. The increase in retail sales indicates higher consumer spending, which contributes positively to economic growth.
- Economic confidence
Consumer sentiment: Higher retail sales often reflect higher consumer confidence. When consumers feel secure about their financial situation, they are more likely to spend, which can spur more economic activity.
- Employment Levels
Job creation: Strong retail sales can increase employment in retail and related industries (e.g. logistics and manufacturing). Conversely, lower sales may lead to layoffs or reduced employment, affecting overall employment levels.
- Investment Decisions
Business investments: Higher retail sales can encourage companies to invest in expansion, inventory, and infrastructure. This investment further stimulates economic activity and can lead to job creation.
- Inflation trends
Price pressures: Changes in retail sales can affect inflation. An increase in sales may increase demand for goods, which can lead to higher prices. Conversely, lower sales may reduce demand and contribute to lower inflation. Strong retail sales may lead to discussions about raising interest rates, while weak sales may lead to consideration of rate cuts or other stimulus measures
- Monetary policy
Interest rate decisions: Retail sales data is closely monitored by the Bank of Canada. Strong sales may prompt the Bank of Canada to consider raising interest rates to prevent rates from rising, while weak sales may lead to lower interest rates or other stimulus measures.
The importance of Canadian retail sales on a monthly basis as an economic indicator?
Canadian retail sales on a monthly (mom) basis are an important economic indicator that reflects changes in consumer spending habits in Canada. Here are some key points regarding their importance:
- Consumer Spending Index
Consumer Confidence: Retail sales data provides insights into consumer confidence and spending behavior. A rally usually indicates consumer confidence in their financial position, while a decline may indicate caution or economic uncertainty.
- Economic health
GDP contribution: Retail sales are a key component of Canadian GDP. Strong retail sales can indicate strong economic activity, while weak sales may indicate an economic slowdown.
- Inflationary pressures
Price adjustments: Changes in retail sales can affect inflation trends. Higher retail sales may increase demand, which can lead to higher prices, while lower sales can indicate lower consumer demand, putting downward pressure on prices.
- Implications for monetary policy
Bank of Canada actions: The Bank of Canada closely monitors retail sales as part of its monetary policy decision-making process. Strong retail sales may lead to discussions about raising interest rates, while weak sales may lead to consideration of rate cuts or other stimulus measures.
- Sector Performance Insights
Economic sector analysis: Retail sales data can highlight trends in specific sectors (e.g., clothing, electronics, food service), providing insights into which parts of the economy are performing well or struggling.
- Market Reactions
Impact on financial markets: The release of retail sales data can trigger immediate reactions in financial markets, especially in the Canadian dollar (CAD), stocks, and interest rate futures. Traders and investors often adjust their positions based on the effects of data.
