Canadian Retail Sales (October 2021)

Ksenia Bushmeneva, Economist | 416-308-7392

Date Published: December 21, 2021

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Consumers loosen their purse strings during the busy holiday shopping season

  • Retail sales rose to a healthy 1.6% month-on-month in October, more than reversing a 0.3% dip in September. Looking ahead, the Statistics Canada flash estimate calls for another solid print in November, with sales projected to increase by 1.2%.
  • Higher prices continued to provide a tailwind to retail sales growth figures. Stripping away the effect of prices, the volume of sales was up 0.9% on the month. 
  • Improved retail activity in October was supported by higher sales of motor vehicle & parts (+2.2%), which rose for the first time since July. Receipts at gasoline stations were little changed in nominal terms (-0.1%), and were down by 3.2% in volume terms. 
  • Core sales, which exclude autos and gasoline, rose by 1.5% month-on-month.
    • Core sales were lifted by a hefty 17.5% gain at stores selling sporting goods, books and music. The release noted that "the increase coincided with the continued resumption of many recreational and school-based sporting leagues in the fall." Housing-related categories also fared well. Sales at building materials, garden equipment and supplies dealers and at furniture stores rose by 3.2% and 3.7%, respectively. Sales at clothing stores were up 1.7% on the month. 
    • On the other hand, sales at food & beverage stores and health & personal care stores declined by 0.6% each. Sales were flat at electronics and appliance stores, marking the seventh consecutive month of soft performance. 
  • On a regional basis, sales were up in every province other than Quebec (-0.2%). Meanwhile, following a decline in September, retail sales rebounded by 1.9% in Ontario largely due to higher sales of cars and parts.         

Key Implications

  • Retail sales had a good month in October. Consumers were willing and able to spend, as supply chain bottlenecks eased their grip a bit, leading higher sales at car dealerships. The preliminary estimate by Statistics Canada points to another solid gain in November. All in all, today's report is consistent with robust growth in personal spending in the final quarter of 2021, which we estimate to advance by 7.7% (annualized). 
  • Rising prices were also evident in today's report. While nominal retail sales were 5.3% higher than a year ago, volumes stood just 1.2% above their October 2020 level. 
  • Looking ahead, renewed public health restrictions amid the rapidly spreading Omicron variant bring a sense of déjà vu from the last year. Provinces across Canada have been reinstating COVID-19 restrictions, with high-contact services sector industries once again bearing the brunt. Reduced spending on services will likely push spending on goods higher. This in turn could prolong supply chain bottlenecks and inflationary pressures.