Photographer: Christinne Muschi/Bloomberg

Canadian Retail Sales Drop Unexpectedly at End of a Banner Year

Canadian retailers ended their strongest year in two decades on a down note, with a disappointing Christmas shopping season pulling back sales in December.

Receipts fell 0.8 percent to C$49.6 billion in the last month of 2017, Statistics Canada reported Thursday. It was the biggest monthly decline since March 2016. Economists were expecting no change during the month.

For all of 2017, sales were up 6.7 percent, the biggest increase since 1997. The year was largely a tale of two halves for retailers with a surge in the first six months masking a deceleration in the second half.

The retail slowdown paralleled growth overall, given consumers have been the main driver of Canada’s economy in recent quarters. The retail release is the last major piece of output data ahead of fourth quarter gross domestic product numbers due March 2.

Economists have been projecting annualized growth in the final quarter of 2017 of about 2 percent, which would be a slight increase from 1.7 percent in the third quarter. The Bank of Canada has been projecting growth of 2.5 percent in the fourth quarter

The retail report is also the third release over the past two weeks that showed unexpected weakness in activity in December. There have been unexpected declines in wholesale sales and manufacturing shipments for the month.

Highlights of Retail Sales Report

  •  In volume terms, sales fell 0.8 percent in December
  • The drop happened despite a 2.1 percent gain in auto sales
  • Excluding autos, sales were down 1.8 percent versus economist estimates for 0.3 percent growth
  • Sales fell in six of 11 categories tracked by Statistics Canada, representing 42 percent of retail trade
  • Sales at general merchandise stores were down 5.3 percent, while receipts from electronics and appliance stories were down 9.1 percent. Statistics Canada cited a shift in promotional activity into November for the drop. Overall, sales by electronics and appliance stores were up 7.2 percent in the fourth quarter
  • Ontario recorded the biggest decline last month, with a 1.6 percent drop
  • Motor vehicles were a main driver of total retail sales in 2017, up 9 percent for the year, led by trucks. Canada surpassed two million car sales in 2017 for the first time ever

— With assistance by Erik Hertzberg

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