Data released on Tuesday showed retail sales in Canada fell 0.5% in September. Analysts at CIBC point out that the biggest drop came from gasoline, linked to lower prices during the month, which saw sales do slightly better in volume terms, down 0.1%. They add that the preliminary estimate for October shows a healthy bounce back of 1.5%, indicating that consumer spending on goods is still relatively strong.
“The third quarter may have represented a slight return to previous strength in terms of retail sales volumes, but given the continued recovery in services spending, the consumer is still expected to be a positive contributor to overall GDP growth in the third quarter.”
“Preliminary estimates for October retail, wholesale and manufacturing indicate that the fourth quarter started with slightly more momentum than we previously anticipated, putting some upward pressure on our GDP forecast and the Bank of Canada’s (annualized +0.5%) forecast for the fourth quarter quarter. . However, it is early days and the impact of past interest rate hikes on consumer spending will only grow in the coming months and quarters.”