Canada retail sales drop in December amid weak holiday spending

Wed Feb 22, 2017 9:11am EST
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By Leah Schnurr

OTTAWA (Reuters) - Canadian retail sales declined unexpectedly in December, marking the biggest drop in nine months as consumers bought fewer new cars and spent less during the holiday shopping season, putting a damper on expectations for economic growth at the year's end.

The 0.5 percent decrease reported by Statistics Canada on Wednesday was worse than economists' expectations for sales to be unchanged. November data was revised slightly higher for a gain of 0.3 percent.

Stripping out the effect of price fluctuations, December's sales volume was down 1.0 percent. The retail figures bucked the trend of recent data pointing to a strengthening economy in December.

The decline in volume "puts a dent into what was otherwise looking like a firm performance for December GDP," said Nick Exarhos, economist at CIBC. Nonetheless, fourth-quarter growth should still come in at around 2 percent, he said, cooling after a strong rebound in the third quarter.

The Canadian dollar weakened to a two-week low against the greenback following the data.[CAD/]

The weak reading could give the Bank of Canada more reason to maintain its dovish tone when it meets next week. The bank is widely expected to hold interest rates at 0.50 percent. [CA/POLL]

"It does hammer home the theme that we have been saying, that the Bank of Canada has been saying, that there is no impetus for the Bank of Canada to follow the Fed in tightening," said Andrew Kelvin, senior rates strategist at TD Securities.

Kelvin said the data will push fourth-quarter growth closer to the central bank's forecast of 1.5 percent, though the economy should still exceed that.   Continued...

A man walks by merchandise with for sale signs at a shopping mall during the Christmas shopping season in Toronto, December 7, 2012.  REUTERS/Mark Blinch