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Canada’s retail sales grow below expectations in November, consumer spending to slow down in 2017

Canada’s retail sales came in below the market expectations in November. The print was up 0.2 percent in the month, as compared with the consensus projection of a sequential rise of 0.5 percent. This follows the upwardly revised figures for October, when sales grew 1.2 percent sequentially. Retail sales in real terms rose firmly by 0.7 percent on the month.

Sales rose at less than half the wider categories and were driven by furniture, building materials, autos and electronics. The increase in these categories were countered by falls registered at gas stations as gas prices dropped sequentially, with huge pullbacks experienced at miscellaneous and food and beverage stores.

Region wise, sales rose in eight provinces, led by N.B., P.E.I and Saskatchewan. Meanwhile, sales in Alberta, B.C. and Newfoundland & Labrador dropped and continued to be lower than last year’s levels in the latter two provinces, noted TD Economics. E-commerce sales contributed 3 percent to the total sales in the month, up from 2.3 percent in October.

In spite of the weaker than expected print, the November report was good. The overall figure was weighed down by fall in the gasoline prices; however, the print comes atop of solid performance in previous months, stated TD Economics. Furthermore, after excluding price effects, sales grew quite robustly by 0.7 percent, which implies that consumption might be the main growth driver in the December quarter of 2016, coming in slightly more than the mid-2 percent mark.

However, some of the consumption strength is expected to fade in 2017. Sales at furniture and building material stores have stimulated retail sales in the recent months. As the housing market eases in 2017, these categories are likely to soften. Sales are expected to be also dragged by gradually increasing longer-term interest rates that are expected to get pulled up along with U.S. borrowing costs.

“We expect consumer spending to decelerate to just under 2 percent in 2017, consistent with the overall pace of growth in the economy”, added TD Economics.

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