December 23, 2011 / 5:13 PM / 6 years ago

Canadian holiday spending higher, but could slow

TORONTO (Reuters) - Early data suggests Canadian consumers are spending more this Christmas than last year, but experts say the surprisingly large gains may not hold through to the end of the crucial holiday shopping season.

From November 25 to December 19, consumer spending, including travel and entertainment as well as retail, rose 4.6 percent over last year, according to data released on Thursday by card payment processor Moneris Solutions.

The data, which is collected from merchants open at least a year, shows that department store sales rose 7.4 percent, while apparel was 3.1 percent higher and specialty retail advanced 0.5 percent.

“There’s a number of things going on that tend to distort the picture. One is that retailers have started promoting earlier this year,” said Ed Strapagiel, executive vice-president at KubasPrimedia, a market research firm in Toronto.

“People might simply be wrapping it up early, as opposed to actually spending more.”

Daniel Baer, national retail industry leader at Ernst & Young, agreed.

“We saw a lot more promotions this year in Canada around U.S. events like Black Friday and Cyber Monday,” he said. “There are some sales that I think moved a little bit forward into the month of November.”

Indeed, the Moneris data confirms that U.S.-style pre-holiday promotions are spreading northward. Canadian retail sales were up 8.3 percent and 15.4 percent on Black Friday and Cyber Monday respectively.

But those imported-to-Canada promotions could put pressure on margins, Strapagiel said, and may not necessarily raise overall revenues.

In general, pre-holiday gains may have come at the expense of later sales, notably the traditional Boxing Day promotions in Canada.

“We also tracked the weekends in December ... and there’s been sort of a leveling off,” said Santo Ligotti, vice-president of marketing and communications at Moneris, who believes the study’s findings are good news for Canadian retailers.

While retail sales were 5.2 percent higher in the first weekend in December, they were 4.8 percent higher the next weekend, and 3.1 percent higher the weekend after that.

The contrast between Black Friday and Cyber Monday and the rest of the season is particularly stark for consumer electronics.

That category saw an incredible 131.5 percent sales boost on Cyber Monday, but actually fell 8.9 percent over the full period.

Baer sees two reasons for the decline.

“One, there’s no high-ticket must-have item in electronics this season,” he said. “I think two is, for bigger ticket items people are cautious ... they are much more willing to spend on the traditional clothing, books, toys categories.”

Reporting By Allison Martell; editing by Rob Wilson

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