February 19, 2021 | 09:06
Canadian Retail Sales (Dec.) — Deep Freeze
Canadian retail sales fell 3.4% in December, as lockdown measures spread across large swaths of the country. The result was worse than expected, but not out of line with our view that, after a strong run through the summer and fall, the Canadian economy went into a form of hibernation for the winter.
Indeed, retail volumes fell 3.6% in the month. And, in a separate release, wholesale sales volumes were down 1.1%, completing a pretty well unanimous run of negative prints across various indicators for the month. But, recall that StatsCan’s preliminary estimate of December real GDP growth was pegged at +0.3%, so perhaps a downward revision is in store. That said, the early January readings are more mixed. Retail sales look to be down another 3.3%, based on StatsCan’s early reading, while employment declines deepened. But, wholesale sales are pointing up a hefty 5.3% and housing activity strengthened further. Add it all up, and the Canadian economy probably remains on track for a flat reading in 2021Q1.
Back on the retail front, all categories but gas stations and health & personal care fell in December, as many shops were shuttered, while others dealt with capacity limits. Some of the declines were hefty, including double-digit drops in sporting goods, clothing and electronics. Weaker auto sales also weighed on the headline. Of course, online sales continue to rise, up 3.8% in the month (seasonally adjusted), but their value is still dwarfed by brick-and-mortar.
Regionally, all provinces saw sales decline in the month, while Toronto specifically (which was at the epicentre of new lockdown measures) was down almost 10%. Interestingly, all provinces but Ontario and Manitoba still saw retail activity above year-ago levels in December.
The Bottom Line: A weak result, but not totally out of whack with our underlying view that the Canadian economy is being challenged through the winter. Markets are already well beyond this, with the outlook much brighter later in 2021.