| Consensus | Actual | Previous | Revised | |
|---|---|---|---|---|
| Month over Month | 0.7% | 1.4% | 0.5% | 0.0% |
| Year over Year | 5.0% | 7.3% | 4.9% |
Highlights
Retail sales started the year on a stronger note than anticipated, expanding at a monthly pace of 1.4 percent in January, twice as much as the 0.7 percent Econoday consensus forecast. Sales were up 5.0 percent from a year earlier. Core retail sales, which exclude gasoline stations and motor vehicles, rose 0.5 percent on the month.
Gains are unlikely to last, however, as the flash estimate for February points to a 0.6 percent decrease, based on 51 percent of responses.
In January, stronger activity was behind the monthly advance, with volumes up 1.5 percent.
Looking at the sector breakdown, the expansion was broad based in January, with a 3.0 percent increase in motor vehicles and parts and a 2.9 percent advance in gasoline station and fuel vendor receipts accounting for much of the gains. Excluding autos and parts, sales were up 0.9 percent on the month. That being said, gasoline station sales were boosted by higher prices as volumes were down 0.6 percent. Gasoline prices appreciated 4.7 percent on the month. In January, the overall 12-month inflation rate came down to 5.9 percent from 6.3 percent, and declined further in February to 5.2 percent.
January core sales were still up even without gasoline and autos, benefitting from a 0.8 percent increase in food and beverages in particular. Sporting goods, hobby, musical instrument, book, and miscellaneous retailers sales and furniture, home furnishings, electronics and appliances retailers were the only two sectors to record lower sales, of 1.2 percent and 1.0 percent, respectively. Housing-related sales were mixed, however, with building material and garden equipment and supplies up 1.5 percent.
Gains were also widespread regionally, as sales rose in all provinces, with the largest increase increased in Alberta (2.9 percent).
Today's stronger-than-anticipated report brought Econoday Consensus Divergence Index to the zone indicating the economy is performing appreciably stronger than expected, pointing to building tightening risk. January retail sales come on the back of further evidence the labour market remains tight, with year-over-year average hourly hours rising 5.4 percent in February, faster than 4.5 percent in January.
However, data on net seem to point to a weakening consumption performance ahead as expected by the Bank of Canada, which expects stalling economic growth in the next couple of quarters to lead to slower wage growth. The central bank projects consumption to contribute 0.7 percentage points to growth in 2023, down from 2.7 points in 2022, with GDP growth slowing to 1.0 percent from 3.6 percent.
A recent survey from Angus Reid Institute also shows that half of Canadians estimate they're worse off than a year ago and"far fewer expect improvement," which supports the view of weakening demand ahead. And while employment increased in February, wholesale and retail trade shed 2,500 jobs. Sales growth was also revised down in December from 0.5 percent to flat.
Of note, today's report reflects a broadening of the Monthly Retail Trade Survey (MRTS) based on the 2022 North American Industry Classification System (NAICS 2022) classification structure. Statistics Canada estimates this translates into higher sales levels but with little change on seasonal variation for many subsectors.
Gains are unlikely to last, however, as the flash estimate for February points to a 0.6 percent decrease, based on 51 percent of responses.
In January, stronger activity was behind the monthly advance, with volumes up 1.5 percent.
Looking at the sector breakdown, the expansion was broad based in January, with a 3.0 percent increase in motor vehicles and parts and a 2.9 percent advance in gasoline station and fuel vendor receipts accounting for much of the gains. Excluding autos and parts, sales were up 0.9 percent on the month. That being said, gasoline station sales were boosted by higher prices as volumes were down 0.6 percent. Gasoline prices appreciated 4.7 percent on the month. In January, the overall 12-month inflation rate came down to 5.9 percent from 6.3 percent, and declined further in February to 5.2 percent.
January core sales were still up even without gasoline and autos, benefitting from a 0.8 percent increase in food and beverages in particular. Sporting goods, hobby, musical instrument, book, and miscellaneous retailers sales and furniture, home furnishings, electronics and appliances retailers were the only two sectors to record lower sales, of 1.2 percent and 1.0 percent, respectively. Housing-related sales were mixed, however, with building material and garden equipment and supplies up 1.5 percent.
Gains were also widespread regionally, as sales rose in all provinces, with the largest increase increased in Alberta (2.9 percent).
Today's stronger-than-anticipated report brought Econoday Consensus Divergence Index to the zone indicating the economy is performing appreciably stronger than expected, pointing to building tightening risk. January retail sales come on the back of further evidence the labour market remains tight, with year-over-year average hourly hours rising 5.4 percent in February, faster than 4.5 percent in January.
However, data on net seem to point to a weakening consumption performance ahead as expected by the Bank of Canada, which expects stalling economic growth in the next couple of quarters to lead to slower wage growth. The central bank projects consumption to contribute 0.7 percentage points to growth in 2023, down from 2.7 points in 2022, with GDP growth slowing to 1.0 percent from 3.6 percent.
A recent survey from Angus Reid Institute also shows that half of Canadians estimate they're worse off than a year ago and"far fewer expect improvement," which supports the view of weakening demand ahead. And while employment increased in February, wholesale and retail trade shed 2,500 jobs. Sales growth was also revised down in December from 0.5 percent to flat.
Of note, today's report reflects a broadening of the Monthly Retail Trade Survey (MRTS) based on the 2022 North American Industry Classification System (NAICS 2022) classification structure. Statistics Canada estimates this translates into higher sales levels but with little change on seasonal variation for many subsectors.
Market Consensus Before Announcement
Retail sales in January are expected to rise 0.7 percent following a 0.5 percent rise in December.
Definition
Retail sales measure the total receipts at stores that sell durable and nondurable goods. The headline data are reported in cash terms and disaggregated into eleven main subsectors. Aggregate volume figures are also provided.
Description
With consumer spending a large part of the economy, market players continually monitor spending patterns. Data are available both for total retail sales and those excluding autos and for 16 different store specializations. Since autos account for over 25 percent of retail sales, the sector can have a pronounced impact on overall sales given their volatility. Retail sales are used to estimate the goods portion of personal consumer expenditures in the quarterly GDP accounts, accounting for about 50 percent of the total.
The pattern in consumer spending is often the foremost influence on stock and bond markets. For stocks, strong economic growth translates to healthy corporate profits and higher stock prices. For bonds, the focus is whether economic growth goes overboard and leads to inflation. Ideally, the economy walks that fine line between strong growth and excessive (inflationary) growth.
Retail sales not only give you a sense of the big picture, but also the trends among different types of retailers. Perhaps apparel sales are showing exceptional weakness but electronics sales are soaring. These trends from the retail sales data can help you spot specific investment opportunities, without having to wait for a company's quarterly or annual report.
The pattern in consumer spending is often the foremost influence on stock and bond markets. For stocks, strong economic growth translates to healthy corporate profits and higher stock prices. For bonds, the focus is whether economic growth goes overboard and leads to inflation. Ideally, the economy walks that fine line between strong growth and excessive (inflationary) growth.
Retail sales not only give you a sense of the big picture, but also the trends among different types of retailers. Perhaps apparel sales are showing exceptional weakness but electronics sales are soaring. These trends from the retail sales data can help you spot specific investment opportunities, without having to wait for a company's quarterly or annual report.
