Owing to stronger activity, retail sales expanded more than expected in December, when they increased 0.9 percent on the month, the largest monthly gain since April 2023, above Econoday's consensus forecast of 0.8 percent. Volumes were up 0.8 percent.

While the December report provides an argument for the Bank of Canada to continue to wait before easing, the advance estimate for January pointing to a 0.4 percent retreat shows the momentum was short lived. In fact, Econoday's Relative Performance Index, at minus 19, remains in a zone consistent with a minor underperformance of the economy.

Retail sales expanded 1.0 percent in the fourth quarter, with volumes rising 1.3 percent. For 2023 as a whole, sales grew 2.2 percent as volumes were up 2.3 percent.

In December, sales were up in five of nine subsectors, led by a 1.9 percent gain in motor vehicles and parts. Excluding this category, the monthly advance was 0.6 percent. When also excluding a 0.9 percent increase in gasoline and fuel, core sales were up 0.5 percent.

Housing-related indicators were weak in December, with sales of furniture, home furnishings, electronics and appliances down 2.7 percent, and building material and garden equipment and supplies down 0.8 percent.

Regionally, sales increased in eight provinces, led by Ontario and British Columbia.

Retail sales in December are expected to rise 0.8 percent on the month following a weaker-than-expected 0.2 percent decline in November.

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.

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.