Canadian Retail Sales (January 2024)

Retail sales retreat in January, but strong core sales point to solid momentum

• Retail sales declined by 0.3% month-on-month (m/m) in January, coming in stronger than Statistics Canada's advance estimate for a loss of 0.4% m/m. December's print was unchanged at 0.9% m/m.
• Adjusted for inflation, the volume of retail sales was up 0.2% in January, building on a 0.8% m/m gain in December.
• Sales at motor vehicle and parts dealers declined for the first time in five months, registering a 2.4% m/m loss in January. December's gain was revised lower to 1.7% m/m (from 1.9% m/m, reported earlier)
• Receipts at gasoline stations and fuel vendors were up 0.9% m/m, after an identical gain in December. 
• Excluding sales at car dealerships and gas stations, core retail sales were up 0.4% m/m, following an increase of 0.5% m/m in December.  
  • The largest contributors to today's gains were sales at sporting goods & hobby stores (+8.3% m/m) and building material & garden supplies dealers (+2.2% m/m) 
  • Receipts fell for food and beverage stores (-0.9% m/m) and clothing & accessories stores (-0.5% m/m).
• E-commerce sales turned positive after two months of losses with a 3.5% m/m gain in January. 
• Statistics Canada's advance reading suggests that retail sales were up by only 0.1% m/m in February (with 58.5% of companies surveyed providing responses).

Key Implications

• Today's decline in the headline reading is primarily due to a pullback in auto sales, reflecting normalization after a year-end surge driven by strong incentives. Despite that, the industry data suggests that auto sales snapped back up into the positive territory in the month of February, likely bolstering durable spending.
  
• Meanwhile core retail sales came in stronger than expected and that points to a solid momentum in spending. Our internal data, excluding autos but including service spending, indicates a slight acceleration in February on the back of solid services spending. With easing inflationary pressures and a potential wealth effect, consumer sentiment seems to be improving, pushing real spending to an annualized rate of around 3.0% quarter-over-quarter (see our forecast).               

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