Retail sales remained relatively unchanged in November. Sales fell in six of the nine sub-sectors, led by lower sales at food and beverage retailers (-1.6%). Higher sales at car and parts dealers (+2.0%) and petrol stations and fuel vendors (+0.7%) largely offset declines in the remaining sub-sectors.
Core retail sales – which excludes petrol stations, fuel vendors and auto and parts dealers – fell 1.0% in November. In terms of volume, retail sales fell 0.4% in November.
Core retail sales declined due to lower sales at food and beverage retailers
Core retail sales fell 1.0% in November, recording their biggest drop in six months. The decline stemmed from lower sales at food and beverage retailers (-1.6%), with supermarkets and other grocery stores (excluding retailers of convenience goods) (-1.5%) contributing significantly. Retailers of beer, wine, and alcoholic beverages recorded lower revenues (-2.9%), marking a second consecutive month of decline.
Sales at retailers of general goods (-1.0%) and retailers of building materials, garden equipment and supplies (-2.1%) also declined in November. Sales of car and spare parts dealers rise The largest increase in retail sales was observed in November at car and parts dealers (+2.0%), with all four store types within this sub-segment recording gains. New car dealers (+2.4%) led the increase, with sales rising for the fourth time in five months.
Sales at petrol stations and fuel vendors increased 0.7% in November after six consecutive months of declines. In terms of volume, sales at petrol stations and fuel vendors fell by 0.8%.
Ecommerce Retail Sales in Canada
On a seasonally adjusted basis, e-retail declined 1.2% to $4.1 billion in November, accounting for 6.1% of total retail compared to 6.2% in October.
Market Reaction to Canada’s Core Retail Sales
The unexpected decline in core retail sales of the Canadian dollar sent waves through financial markets, particularly affecting the Canadian dollar and stock indices. Following the announcement, the Canadian dollar saw a significant decline against major currencies. Investors often interpret low retail sales as a sign of weakening consumer confidence, which can lead to lower spending.
This sentiment was evident as the dollar slipped against the US dollar, as traders adjusted their positions to take into account what they see as a potential slowdown in economic growth.
The stock market also felt the fallout from this disappointing data. Discretionary consumer goods stocks were affected, which are particularly sensitive to changes in retail sales. Companies that rely heavily on consumer spending, such as retailers and service providers, have seen their share prices fall. Analysts attributed the decline to fears that the continued decline in retail sales would lead to lower corporate profits and, therefore, a less favorable investment climate. The general bearish sentiment in the market reflects a cautious approach among investors, who warn of the effects of this economic data on future growth prospects.
We will explore the effects of these figures on the market, the potential consequences of monetary policy, and what analysts expect for the coming month. Moreover, the bond market responded in the same way, as yields on Canadian government bonds fell as investors sought safer assets amid heightened uncertainty.
The combination of weak retail sales and a weaker Canadian dollar prompted many investors to reassess their expectations for future interest rate increases by the Bank of Canada. Market participants now increasingly expect the Bank of Canada to adopt a more dovish stance in response to slowing consumer spending, which could have a further impact. on bond yields and overall market dynamics.
Forecast for the current month on core retail sales in Canada
Looking ahead, the outlook for core retail sales figures for the current month is mixed. Economists and analysts are cautiously optimistic about the prospect of a rebound from the previous month’s disappointing data. However, various factors may influence consumer spending patterns, making it difficult to predict the outcome with certainty. While some indicators point to a possible recovery, others point to ongoing economic challenges that may continue to affect retail sales.
Consumer sentiment plays a crucial role in retail performance, and recent surveys suggest that Canadians feel increasingly uncertain about their financial prospects. Factors such as inflationary pressures, rising interest rates, and geopolitical tensions
Canada’s disappointing core retail sales figures are likely to have significant implications for the Bank of Canada’s monetary policy decisions. Central banks are closely watching retail sales as a key indicator of the health of the economy, and the contraction in this sector raises concerns about the sustainability of growth. The Bank of Canada has a dual mandate: to maximize employment and keep inflation at a target level. A slowdown in consumer spending could jeopardize both targets, as lower demand could slow job growth and lower potential inflation..
Given the actual reading at -0.7%, analysts now speculate that the Bank of Canada might delay further rate increases, which analysts had previously expected based on earlier economic indicators.
The bank’s recent monetary policy data indicated its willingness to respond to changing economic conditions, and lower retail sales could act as a catalyst for a more cautious approach. With signs of weakness already showing signs of economic growth, the Bank of Canada may prioritize supporting consumer spending through accommodative monetary policy.
