Canadian retail sales are weaker but not as weak as anticipated. Statistics Canada (StatCan) retail sales fell in September, with the drop attributed to a single (but large) category. While retail sales are holding up stronger than the headline data suggests, the longer-term issue of stagnation remains.
Canadian Retail Sales Flat Excluding Gas and Vehicles
Canadian retail sales fell 0.7% to $69.8 billion in September, a minor setback in current dollars. The blow was softened by otherwise stable activity in Q3, which contracted 0.3% in volume. This certainly indicates a slowdown, but not the market-crumbling expectations shared by some policymakers.
However, core retail sales—excluding gas and fuel, and motor vehicle and parts dealers—were largely unchanged. This suggests that while declines were observed across 6 of the 9 major categories, the pullback was almost entirely driven by motor vehicles and parts dealers (-2.9%), led by new car dealers (-3.6%).
Canadian Retail Sales Have Barely Grown Since 2021
Source: StatCan.
Retail sales in chained dollars—stripping out price changes—tell a similar story for the month, but remain a problematic trend. Sales have only advanced 0.6% since March 2021, which is remarkably slow over 5 years and over 2 million people added to the population. The peak in March 2021 was also a year prior to the first rate hike, indicating financing conditions may be contributing to issues but weren’t the initial trigger here.
Canadian retail sales are better than the headline data suggests but longer-term issues remain. The shock in September was largely confined to a single category. Retail sales aren’t quite as healthy looking after inflation, showing not a lot of growth in spending from households in real terms even with a population boom. This suggests inflation remains a bigger issue at the category level than headline CPI, but that’s not new.
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