Canada’s holiday sales period got underway in November with a 0.2 per cent decline in retail sales led by falling purchases at food and beverage retailers.
The data released by Statistics Canada on Friday revealed November’s retail sales amounted to $66.6 billion, lower than many economists had expected.
Shelly Kaushik, an economist with BMO Capital Markets, declared the month a “Black Friday bust.”
“The headline drop in retail sales was disappointing,” she wrote in a note to clients.
“Weak sales volumes point to an economy that remained at a standstill in November as consumers continue to adjust to a higher interest rate environment.”
Core retail sales, which exclude gas stations, fuel vendors and motor vehicle and parts dealers, were down 0.6 per cent in the month.
The decrease was driven by declines in four of the nine subsectors Statistics Canada tracks.
There was a 1.4 per cent drop at food and beverage retailers and a 1.8 per cent fall in general merchandise. Sales at supermarkets and other grocery retailers, excluding convenience stores, were down 1.6 per cent and beer, wine and liquor retailers experienced a 3.3 per cent fall.
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“The decrease in grocery store sales wasn’t a prices story, but could possibly reflect consumers substituting towards lower-priced brands at stores, as grocery store prices are generally still rising uncomfortably fast,” said Katherine Judge of CIBC Capital Markets in a note.
The largest increase to core retail sales in November came from clothing, apparel accessories, shoes, jewelry, luggage and leather goods retailers, which rose 1.5 per cent.
The largest increase in overall retail sales in November was seen across motor vehicle and parts dealers, which were up for a third consecutive month.
Judge took the data to mean that “Canadian consumers are increasingly struggling with higher interest rates.”
Rates remained high throughout 2023 as the Bank of Canada carried out hikes to attempt to get inflation down to its two per cent target, but the high rates have weighed on some purchasing decisions.
Along with categories like grocery and general merchandise, Judge pointed out that sales were down in online shopping — a key measure of discretionary spending.
On a seasonally adjusted basis, retail e-commerce sales were down 1.5 per cent to $3.9 billion in November, accounting for 5.8 per cent of total retail trade, compared with 5.9 per cent in October, Statistics Canada said.
Ahead of the holiday period, Deloitte predicted the average Canadian shopper would spend $1,347 on purchases across the festive season, down 11 per cent from last year.
Roughly half of the more than 1,000 Canadians the consultancy company surveyed planned to buy only what their family needs this past holiday season. Seventy-one per cent said they would seek items on sale and 29 per cent would seek less expensive retailers to shop at.
The country will get a better look at how accurate such data was next month, when Statistics Canada releases December’s retail sales figures.
The agency’s early estimate for the month suggests sales increased 0.8 per cent, but it warned the figure would be revised.
Despite the advance estimate showing a rise in sales, Judge said, “we expect that strength to be fleeting given the weakening labour market and the impact of higher interest rates on spending.”
© 2024 The Canadian Press
