Achi news desk-
OTTAWA –
A retreat in new car purchases helped push the country’s retail sales down 0.3 percent to $67 billion in January, Statistics Canada said Friday.
The national data agency revealed overall retail sales were down in three of nine sub-sectors it tracks with sales at motor vehicle and parts dealers falling 2.4 per cent, the category’s first drop in five months. New car sales fell 3.0 per cent, while used car dealers gained 4.5 per cent.
The numbers cover a period when Canadians typically take stock of holiday spending and sometimes cut back on larger purchases to help them handle credit card payments due for gifts, gatherings and other celebrations in December.
Despite the decline in overall retail sales, economists said January had a bright spot: core retail sales that came in above many of their expectations.
Core retail sales – which exclude gas stations and fuel sellers, and motor vehicle and parts dealers – rose 0.4 per cent in the first month of 2024. The increase was mainly due to higher sales in sporting goods, hobby, musical instruments, books, and miscellaneous retailers, which saw an increase of 3.0 percent.
“That points to solid momentum in spending,” Maria Solovieva, an economist with TD, wrote in a note to investors.
Some of that momentum comes from what Solovieva calls the “wealth effect,” where recent gains in the financial markets and massive growth in liabilities have pushed Canadian household wealth up.
Also boosting the momentum, he said, the costs of many goods and services are easing. Statistics Canada announced Tuesday that the annual inflation rate fell to 2.8 percent in February amid sharp declines in cellular and internet services, as well as slower growth in grocery prices.
Andrew Grantham, one of CIBC’s senior economists, noted that the weather also plays a role.
Some of the increases, including those in sporting goods, hardware and garden stores, were attributable at least in part to pockets of unseasonably warm weather in several regions of Canada, he said.
“While clothing sales were down in nominal terms, that was driven by lower prices and in volume terms, sales were up on the month,” Grantham said.
“A further large monthly increase in the number of sales at gasoline stations is another sign that mild weather may be affecting the latest retail sales figures.”
In volume terms, Statistics Canada said retail sales rose 0.2 per cent in January.
Shelly Kaushik, an economist with BMO, said in her note to clients, “those higher volumes would support economic growth to start the year.”
Looking ahead, Statistics Canada’s advance projection of retail sales for February suggests sales rose 0.1 per cent for the month, although it warned the figure would be revised.
Grantham expects consumer spending to post only marginal growth and said per capita declines are likely on their way, but later this year, there could be an acceleration if the interest rate is cut.
This report was first published by The Canadian Press on March 22, 2024.
