Lacklustre retail sales heading into the holidays

Clothing, clothing accessories, shoes, jewelry, luggage and leather goods retailers had a 0.7 per cent drop in sales. Photo by Christinne Muschi/The Canadian Press files

Article content

A drop in food and beverage sales led a 0.2 per cent decline in retail sales in October, to $69.4 billion, according to Statistics Canada.

Article content

StatCan said core retail sales, which exclude gas stations, fuel vendors and motor vehicle and parts dealers, were down for the second consecutive month, dropping 0.5 per cent. Sales of beer, wine and liquor posted the biggest decline, at 10.6 per cent.

Article content

Article content

Article content

However, the drop in alcohol sales coincided with labour disruptions by public-sector workers in B.C., which included employees at provincial liquor stores.

Article content

Article content

Supermarkets and other grocery retailers across the country reported lower receipts in October, down 0.7 per cent.

Article content

Aside from food and beverage, sales were down in three other subsectors.

Article content

Clothing, clothing accessories, shoes, jewelry, luggage and leather goods retailers had a 0.7 per cent drop in sales. Sales at health and personal care retailers were down 0.3 per cent.

Article content

Meanwhile, furniture, home furnishings, electronics and appliances retailers contributed the largest increase to core retail sales in October, at 1.1 per cent.

Article content

In volume terms, retail sales for the month decreased 0.6 per cent.

Article content

Statistics Canada said its advance estimates suggest a rebound in November, with sales increasing 1.2 per cent.

Article content

In a note, Canadian Imperial Bank of Canada economist Andrew Grantham said retail sales volumes likely remained below their average from the summer, even after accounting for the solid rebound suggested by the November advance estimate.

Article content

Article content

He said the underlying trend in retail sales appears relatively flat and signals a slowdown compared to the surprising strength seen at the start of the year.

Article content

Article content

“Through the ups and downs of the monthly volatility, Canadian retail sales appear to be going nowhere so far during the second half of the year,” wrote Grantham.

Article content

He added that Canada’s weakening population growth may partly be reflected in the softer underlying trend for retail sales so far in the second half of the year.

Article content

But there also seems to be some caution among Canadian households when it comes to spending, he said.

Article content

Grantham said this could mean demand is not excessive and underlying inflation should continue to ease and allow the Bank of Canada to keep rates at the current lower level through 2026.

Article content

In another note, David Rosenberg, founder and president of Rosenberg Research & Associates Inc., said the downward year-over-year trend — and retail sales activity now being lower than it was at the end of 2024 — does not bode well for Q4 GDP.

Article content

“And markets seem to believe that in this squishy-soft demand environment, the next move by the Bank of Canada will be to hike rates,” he wrote, adding, “Not likely.”

Article content

Article content