Canada’s retail sales rise for third straight month in October, consumer spending to remain firm in Q4

Canada’s retail sales rose for the third consecutive month in October. Retail sales recorded growth of 1.1 percent; however, in real terms, sales rose modestly by 0.6 percent. Increase in October was quite widespread. The biggest growth came from gasoline station receipts, which recorded a rise of 3.8 percent, the largest rise in six months and because of higher prices.

Other areas of strength included general merchandise, food and beverage and clothing stores. On the other hand, sales at electronics and appliance stores registered a fall in October, noted TD Economics.

Region wise, sales grew almost throughout the board, led by Ontario and British Columbia. Sales in Manitoba were remained flat, whereas PEI recorded a drop of 1.1 percent, the only province to register a fall, thanks to a rise in the HST that took effect at the beginning of the month.

Gains in October, combined with solid handoff from September, implies that retail sales would be supportive of growth in the fourth quarter. Consumer spending growth as a whole is likely to keep the third quarter’s healthy 2.5 percent pace in the fourth quarter; however, the October’s print shows certain upside risk to that projection, according to TD Economics.

Going forward, consumers would continue to be a strong pillar of growth for Canada’s economy as the benefit of past home appreciation in several regions, especially British Columbia and Ontario continue to prop up spending activity. However, a modest easing in the housing market, increasing interest rates and high household indebtedness might result in consumers to pull their purse strings slightly tighter.

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