Weakness in retail sales suggests slowing consumer spending

The Conference Board of Canada’s Director of Forecasting, Matthew Stewart offers the following insights on today's Retail Trade release:

Today’s retail sales release gives an early picture on how consumer spending has fared in the fourth quarter. In our latest economic outlook, we projected modest growth in consumer spending held back by weakness in consumer durables. October’s weak retail sales picture suggests consumer spending could be even weaker than we projected, creating some downside risk to our economic outlook.

  • One of the key stories over the past few months is the likelihood of Canada tipping into recession in the new year. With global growth slowing, strength in Canada’s household sector is critical to keeping Canadas economy growing.
  • So far, strong employment and wage growth have continued to support increased consumer spending. However, the rapid increase in debt that we’ve seen consumers accumulate over the last decade continues to hang over the household sector’s prospects.
  • Today’s release on October’s retail sales gives us an early picture of how household spending has fared in the fourth quarter of 2019.
  • Unfortunately, retail sales decreased by 1.2 per cent in October. This brings retail sales to their lowest level in 8 months. The largest declines were in Ontario and Quebec.
  • The decline was primarily attributable to lower sales of motor vehicle and parts and building materials.
  • After accounting for the effects of price changes, the volume of retail sales decreased 1.4 per cent.
  • In our latest economic outlook, we projected modest consumer spending growth held back by ongoing weakness in consumer durables. Today’s release suggests consumption of durables could be even weaker than we projected. If that negative momentum continues, it would create some downside risk to our economic outlook for 2020.
Matthew Stewart

Matthew Stewart

Director, Forecasting

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