Deloitte Canada: key insights around this critical weekend for consumers and retailers
Canadian consumers splurged in September and October, a surprise resurgence in spending even as high interest rates restrict household budgets.
Receipts for retailers rose 0.8 per cent last month, according to an advance estimate from Statistics Canada released Friday. That’s the biggest jump since April, and followed an unexpected 0.6 per cent increase a month earlier, which far exceeded the median estimate of a flat reading in a Bloomberg survey of economists.
Sales were up in four of nine subsectors, led by gains at car and parts dealers, which were up 1.5 per cent in September. Excluding autos, retail sales rose 0.2 per cent, versus expectations for a decrease of 0.1 per cent. In volume terms, retail sales grew 0.3 per cent.
Despite a sharp rebound in headline numbers, details in the report point to consumer weakness. Core retail sales, which exclude gas stations and car dealers, were down 0.3 per cent in September. The decline was led by lower sales at sporting goods, hobby and musical instrument retailers as well as beer, wine and liquor stores, suggesting consumers cut back on some discretionary purchases.
With the economy already showing signs of stagnation, the Bank of Canada will probably look past what’s likely to be a temporary pick-up in demand, and hold borrowing costs at 5 per cent while waiting for the softening economy to weigh heavier on spending. Accounting for record population growth, core retail sales are declining. Policymakers next set rates on December 6.
Earlier this week, Governor Tiff Macklem said interest rates may now be restrictive enough to return to price stability, and that more downward pressure on inflation is in the pipeline with the economy expected to remain weak for the next few quarters.
Regionally, sales increased in eight of 10 provinces in September. The country’s most populous province, Ontario saw the largest provincial increase, led by higher sales at car dealers, but sales were down 0.6 per cent in Toronto, its largest city.
The agency didn’t provide details on the October estimate, which was based on responses from 48.7 per cent of companies surveyed.
In a separate release, Statistics Canada said advance results showed manufacturing sales declined 2.7 per cent in October, with the largest decreases in petroleum and coal product, machinery and transportation equipment subsectors.