Canadian Retail Sales Up 0.1% In September

Canadian retail sales rose just 0.1% in September, much worse than expected by consensus. There were stronger sales in 7 of the 11 subsectors including autos whose sales rose 0.6% in the month. Excluding autos, sales were flat, also disappointing consensus despite the one-tick upward revision to the prior month. Ex-autos sales in September were supported by increases in food/beverage (+0.1%), clothing and accessories (+0.8%), electronics (+0.8%), building materials (+0.3%) and health/personal care (+0.6%).

Those offset declining sales elsewhere, including the 0.6% drop at gasoline stations. In real terms, overall retail sales were flat (top chart). In September, nominal retail sales fell in five provinces (including the 0.7% drop in Quebec) and rose in four others (including Alberta’s notable 1.7% increase). On a year-on-year basis, Alberta leads the nation with retail spending up 8.5%, followed by Saskatchewan (+6.4%), contrasting sharply with contractions in Quebec (-0.4%) and New Brunswick (-1.3%).



OPINION: The September retail report was very disappointing. The flat retail volumes coupled with the earlier-reported contraction in real wholesaling should offset the reported gains in real manufacturing, leaving September GDP roughly flat in the month. For Q3 as a whole, however, consumers seemed to have bounced back with a decent 2.6% annualized gain in discretionary spending.

In real terms, retail spending grew 2.4% annualized in the third quarter after contracting in the first half of the year. That's welcome news as it means consumers likely offset weakness elsewhere in the Canadian economy. Still, we're expecting Q3 GDP growth (out next week) to show a very weak print of around 0.5% annualized. With below-potential growth, conditions are clearly not conducive for tighter monetary policy.