Canadian retail sales came in lower than expected in November, according to Statistics Canada, and economists say the figure demonstrates the strain high interest rates are putting on consumers.

“It’s a continuation of that story of consumers really being hard hit,” Pedro Antunes, chief economist with the Conference Board of Canada, told BNN Bloomberg following the Friday data release.

Sales saw a 0.2 per cent decrease in November, which missed the median estimate of a flat reading in a Bloomberg survey. In volume terms, retail sales also edged down 0.2 per cent that month, StatCan said.

Antunes said the figures show the Bank of Canada’s rate-tightening policy approach is having its “intended effect” by slowing economic activity to allow supply to catch up with demand.

He added that on a per capita basis, consumer spending was “hammered” in October and November, approaching levels seen during recessions, and this was only partially offset by population growth.

“We're in very deep recession territory,” he said. “There’s a lot of pain here being felt by a lot of households and it's showing up in these numbers.”

Despite the lower-than-expected November figures, StatCan’s early estimate for December suggested sales increased by 0.8 per cent that month, though the agency noted that the figure would be revised.

CIBC Capital Markets senior economist Katherine Judge said in a Friday note that the estimated rebound in sales last month is likely “fleeting” given a weakening labour market and the continued impact of high interest rates on household budgets.

Interest rate outlook

Antunes said that the Bank of Canada’s monetary policies have helped to decrease inflationary pressures, despite the strain they’ve put on consumers, and he sees inflation “heading in the right direction.”

Antunes said he expects the central bank will be watching wage growth closely in the coming months, as wages have been growing at a higher rate than the rate of inflation in recent months.

The Conference Board of Canada is calling for an interest rate cut in the late spring or early summer of this year, Antunes said. The Bank of Canada is set to make its next interest rate decision on Jan. 24.

With its trend-setting rate currently set at five per cent, economists are watching closely for signs indicating when the central bank will start to cut rates, now that inflation has come down significantly and the economy is showing signs of slowing.

Expecting 'very weak growth'

The pinch being felt by Canadian consumers is something people in most of the world’s economies are dealing with, Antunes added– and he expects a weaker global economy will weigh on Canada’s trade sector for most of this year.

“We're expecting very weak growth overall in Canada for this year,” Antunes said.

“The good news is that most of that pain and that impact has already been felt, and we're hopeful that we will see the economy starting to pick up in the second half of this year as interest rates come down.”

With files from Bloomberg News and the Canadian Press