Customers wait in a lineup at a Toronto Target location on Feb. 5, 2015.Fred Lum/The Globe and Mail
Canadian retailers received a chilly holiday reception from consumers to end 2014, as retail sales suffered their biggest monthly slump in more than four years amid growing uncertainty about the Canadian economy.
Statistics Canada reported Friday that retail sales totalled $42.1-billion on a seasonally adjusted basis in December, down 2 per cent from November. That represents the biggest one-month decline since April, 2010.
And Statscan noted that while sharply lower retail prices for gasoline were a factor (gas station sales plunged 7.4 per cent), the overall sales slump was broadly based, with nine of 11 sectors showing declines. On a volume basis, factoring out price changes, retail sales fell 1.3 per cent in the month.
The worse-than-expected retail numbers delivered a blow to the Canadian dollar, which lost about one-third of a cent against its U.S. counterpart on the news, dipping below 80 cents (U.S.).
The December sales drop more than offset November's solid 0.4-per-cent rise. Holiday sales have commonly tapered off in December in recent years, reflecting the growing adoption in Canada of the big U.S. "Black Friday" sales to kick off the gift-buying season following the November Thanksgiving holiday south of the border. Nevertheless, this is the biggest December downturn since the Great Recession hit in 2008.
"It appears that Canadian consumers kept a firm grip on their wallets during the month," said economist Nick Exarhos of CIBC World Markets.
But some economists cautioned that the Black Friday effect may be complicating Statscan's measurement of seasonally adjusted December numbers. On an unadjusted basis, December's sales were up 9.3 per cent from November, the biggest December increase in three years.
"Before getting too downbeat on Canada, it's clear that the weakness in this report is at least partially due to trouble seasonally adjusting the impact of Black Friday. Shoppers are spreading their holiday shopping over a longer period, with Black Friday boosting November and dragging on December," said Benjamin Reitzes, senior economist at BMO Nesbitt Burns. "There was similar broad-based weakness in retail sales in December 2012 and 2013."
Economists also noted that in the past few years, weaker retail sales in December have been followed by a rebound in January. This may reflect the increased use of gift cards – which are recorded as sales when the recipient makes a purchase using the card, rather than when the card is purchased. So, cards bought in December as Christmas gifts, but not used until January, are counted in January's sales rather than December's.
"It would be wise to wait for January's report before jumping to conclusions about the economy based on this retail report," Mr. Reitzes said.
Seasonally adjusted sales of motor vehicles and parts fell 1 per cent in December, as new cars suffered their third straight monthly decline. Clothing and accessories slumped 5.6 per cent. Appliances and electronics sales tumbled 9.2 per cent, after a 3.9-per-cent rise in November. Sporting goods, hobby, books and music sales fell 1.3 per cent.
On the upside, food and beverage sales rose 1 per cent in the month, while health and personal care edged up 0.2 per cent.
Statscan said that retail sales were down in all 10 provinces.
Economists noted that even with the December downturn, retail sales enjoyed a solid fourth quarter.
"Despite soft employment and wage growth, retail volumes managed to grow 2.4 per cent annualized in the fourth quarter," said Krishen Rangasamy, senior economist at National Bank of Canada.
Economists added that despite the retail sales setback, they still December's gross domestic product growth to be in the 0.3 per cent range, due to strong previously released results from manufacturing and wholesale trade.
David Parkinson