Flat Retail Sales Weigh on GDP Growth 

On last Friday, Canada’s retail sales in October came in slightly below expectations as increased new car sales offset weaker consumer spending at supermarkets, grocery stores, and wine shops. 

Retail sales which encompass motor vehicles, clothing, furniture, food and beverages, and other categories rose by 0.6% in October, according to Statistics Canada. The report noted that sales increased in five of nine subsectors. Preliminary estimates for November, based on surveys from only half of respondents, suggested that sales likely remained flat. 

(Canada’s Retail Sales m/m Chart, Source: Statistics Canada) 

(Canada’s Core Retail Sales m/m Chart, Source: Statistics Canada) 

Retail sales serve as an early indicator of Gross Domestic Product (GDP) growth, accounting for nearly 40% of total consumer spending, which is the primary driver of economic expansion in the third quarter. Despite this, Canada’s economy grew at an annualized rate of just 1% during the third quarter, falling short of the Bank of Canada’s forecasts. Early indicators suggest that fourth-quarter GDP growth may also fall below the central bank’s 2% projection. The GDP figures for October are scheduled for release on Monday. 

Analysts had anticipated retail sales growth of 0.7% for October and projected a 0.5% increase in sales excluding the automotive and parts sector. However, when excluding the automotive subsector which comprises more than a quarter of total retail trade, the sales grew by a modest 0.1%. The slight increase in October brought total retail sales to C$67.58 billion in value. However, sales remained unchanged when adjusted for volume. 

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