Canadian Retail Sales Rose 0.2% In November

Canadian retail sales rose 0.2% in November, topping consensus expectations. There was, however, a two-tick downward revision to the prior month to +0.5%. There were stronger sales in only 4 of the 11 retail subsectors. Auto/parts sales rose 1.8% (a third consecutive increase), thanks to strong sales of both new and used vehicles. Excluding autos, however, sales fell 0.3%, much weaker than consensus expectations.

Ex-autos sales were supported by increases in sporting goods (+1.4%), electronics (+8.9%), furniture (+3.9%) although those were more than offset by declining sales elsewhere including the 2.3% drop in gasoline sales and the 1.4% decline in sales of building materials. In real terms, overall retail sales rose 0.8% (top chart). Regionally, on a year-on-year basis, Newfoundland & Labrador now leads the nation with retail spending up 5.2%, followed by Alberta (+4.4%) and Saskatchewan (+4.3%).



OPINION: November's retail report was mixed, with a decent increase in the headline boosted by autos, but with a disappointing ex-autos print as sales declined in 7 of the 11 retail subcategories. Still, the gains in retail volumes are unambiguously positive, and coupled with the earlier reported advances in real wholesaling and real manufacturing represent a winning trifecta for November GDP which may show growth of around 0.3% in next week's release.

For Q4 as a whole, nominal discretionary spending is up from the prior quarter, thanks to autos (middle chart). However, in real terms, the picture is less bullish. With two months of data, retail volumes are tracking just +1.3% annualized in Q4, a sharp deceleration from Q3's +2.6% print (bottom chart). The weak start to the quarter is clearly to blame.

We're not expecting the last month of the year to significantly change the consumption picture given the weak auto sales reported in that month, and the further decline in the Conference Board's consumer confidence index. All told, we remain comfortable with our call that Canada’s GDP growth remained modest in the final quarter of 2012.