Canadian consumers opened their wallets a little more in October, pushing retail sales up 0.7% to $66.9 billion for the month, but Statistics Canada and analysts warn those numbers won’t continue to climb.
The federal statistics agency said Thursday that the recovery in overall retail sales was largely due to higher sales at new car dealerships. Sales at motor vehicle and parts dealers rose 1.1% in October, helped by a 1.3% increase at new car dealers and a 2% increase at other motor vehicle dealers.
Statistics Canada said sales increased in seven of nine subsectors, including food and beverages, furniture, electronics and appliances, clothing and sporting goods.
But the agency added that its first estimates for November suggest that sales remained relatively unchanged in November and warned that this figure would be revised.
Shelly Kaushik, economist at BMO Capital Markets, called October retail sales “strong” as core retail sales – which exclude gas stations, fuel retailers and vehicle and car dealerships auto parts – increased by 1.2%.
“However, indicators for November suggest that consumer spending could slow significantly during the remainder of the fourth quarter,” she wrote in a note to investors.
Andrew Grantham of CIBC Capital Markets shares a similar view, saying October’s spending recovery does not appear to have continued into November.
He expects last month’s figures to show flat sales and said that beyond that, consumer spending will likely be hampered by a further weakening of the Canadian labor market.
His forecast is based on data released separately Thursday by Statistics Canada, showing that the number of employees receiving wages and benefits from their employer fell by 44,600 in October compared to September.
These figures provide a glimpse of what consumers were facing heading into the holiday season, when retailers tend to see more activity as people buy gifts and other products to entertain themselves.
An online survey conducted by consulting firm KPMG between October 20 and November 2 found that 83% of 1,507 Canadians surveyed are more cautious about their spending this year compared to last year.
Additionally, 70% of respondents said they did not plan to spend as much on discretionary items-travel, clothing, electronics, entertainment, toys and restaurants-as in previous years, while 66% said they planned to spend only on essential goods such as groceries or personal care products.
Maria Solovieva of TD Economics wrote that “although the improvement in spending habits during the holiday season has reached a positive note, it is not certain that this harmonious pace will continue in the same way during in the new year, as spending is expected to slow in the first half of 2024.”