Canadian consumers disappoint in September as retail sales inch up 0.1%
The latest snapshot of consumer spending in Canada is setting an ominous tone for retailers on the eve of the crucial holiday shopping season.
Retail sales rose just 0.1 per cent in September, according to data from Statistics Canada released on Thursday, falling well short of the average estimate for a 0.9 per cent gain. The details were even worse, with sales in volume terms sliding 0.6 per cent.
The unexpected weakness prompted some debate among top economists over what compelled consumers to tighten their purse strings.
"Canadian consumer spending appears to have cooled after a very strong first half of 2017. This is consistent with expectations for the broader economy to decelerate in the second half of the year," Benjamin Reitzes, Canadian rates and macro strategist at BMO Capital Markets, wrote in a note to clients.
"For the Bank of Canada, it’s still too early to tell but perhaps their rate hikes are already impacting consumers? This is something policymakers will be watching closely as we move into 2018."
Gasoline sales rose for the second month in a row in September, up 2.6 per cent, as supply disruptions caused by Hurricane Harvey in the United States lifted prices at the pump.
But that was tempered by a 0.5 per cent decline in sales of motor vehicles as Canadians bought fewer new and used cars. It was the first time vehicle sales declined since June. Excluding vehicles, retail sales were up 0.3 per cent.
A 2.8 per cent decline in sales of clothing and accessories also weighed on overall retail sales. In all, sales were up in just five out of 11 sectors, accounting for 52 per cent of retail trade.
But one economist blames the unusually mild weather for the decline.
"The unseasonably mild weather in the Fall this year delayed the timing of purchases of winter apparel," Nick Exarhos, a senior economist with CIBC Economics, wrote in a report. "This could be a theme in the October figures as well, and was something that firms in the space had mentioned as a negative to earnings growth in recent conference calls."
Sales at stores associated with home purchases was one source of strength, with building material and garden equipment sales up 2.6 per cent, while furniture purchases increased by 2.3 per cent.
"Consumer spending has been a key driver of economic growth this year and while a more sustainable rate of growth is likely, it should remain a key support going forward,” wrote TD Economist Dina Ignjatovic in a report to clients.
“Indeed, some improvement in retail sales could be in the cards."
-- With files from BNN