As U.S. retailers prepare for what could be one of the busiest Thanksgiving shopping weekends in years, Canada would be happy just to snap out of its retail sales funk.
Even with the federal government sending out enhanced Canada Child Benefit cheques during the summer, retail sales were flat in May and slipped on a month-to-month basis in each of June, July and August as debt-strapped consumers tightened their belts.
On Tuesday, we'll see if that losing skid ends when Statistics Canada releases retail sales for September. Economists are optimistic that relief is in sight – which would be a welcome development for retailers gearing up for the crucial holiday shopping season.
"We've yet to see clear evidence that the enhanced child benefits program (which took effect in July) has been supportive of sales," Bank of Montreal senior economist Benjamin Reitzes said in a note. Still, he predicted that retail sales "likely rose 0.6 per cent in September, with gains in auto sales and at gas stations (thanks to higher pump prices) driving the first headline increase in five months."
Canadian Imperial Bank of Commerce is slightly more optimistic, calling for a 0.7-per-cent gain. Such an increase would boost the outlook for September gross domestic product, as would an expected 0.4-per-cent increase in wholesale trade [to be released on Monday]," said CIBC senior economist Nick Exarhos.
"As a result, the fourth quarter should be on track to at least match our 1.5-per-cent or so growth forecast, diminishing the near-term chances of a [Bank of Canada] ease, Mr. Exarhos said.
He added that "low rates and strong job growth in [the third quarter] should see consumer spending rebound in the fourth quarter."
Canada's retail sales slump stands in contrast to the cheerful tone south of the border, where consumers appear ready to put the acrimonious presidential election behind them and hit the malls in a big way on Black Friday and the rest of Thanksgiving weekend.
Momentum is certainly on U.S. retailers' side. Last week, the Commerce Department reported that U.S. retail sales jumped a bigger-than-expected 0.8 per cent in October as consumers bought more automobiles, building materials and a range of other goods.
In another positive sign, September retail sales were revised upward to a gain of 1 per cent from a previously reported increase of 0.6 per cent.
According to a survey by the National Retail Federation, 137.4 million Americans are expected to shop in stores or online from Thursday through Sunday, up from 135.8 million last year. That would augur well for the the rest of the holiday shopping season.
For the months of November and December as a whole, the trade group has forecast that sales will rise 3.6 per cent. Many retailers have already started rolling out pre-Black Friday deals, and major chains including Target, Wal-Mart, Macy's, and J.C. Penney plan to open their doors on Thanksgiving Day.
"Retailers know consumers are spreading out their holiday budgets to shop throughout the season," NRF chief executive officer Matt Shay said in a statement. "The holiday shopping season is long and consumers will look for and expect great deals down to the very last minute."
According to the NRF survey, 21 per cent of Americans plan to shop on Thanksgiving Day. But the most popular shopping day remains Black Friday, with 74 per cent of people planning to hit the stores.
Among key economic reports this week is U.S. durable goods orders for October, which will be released on Wednesday.
"Following a string of weak prints, headline durable goods orders are set to come flying back. Almost solely on the back of a jump in the volatile aircraft figures, orders will reach their highest level since 2014," said CIBC senior economist Royce Mendes. However, after stripping out transportation, CIBC expects durable goods orders to rise by a modest 0.2 per cent.
Also on tap this week are minutes from the Federal Open Market Committee's Nov. 2 meeting. The minutes, to be released Wednesday, will be scrutinized for clues about when the Fed will hike its benchmark interest rate. Given the recent strong retail sales data – in addition to an improving jobs market, solid home-building activity and other positive economic data – most observers are expecting a rate increase at the Dec. 13-14 meeting.
"A December hike appears to be in the bag," said Michael Dolega, senior economist with Toronto-Dominion Bank.