OTTAWA (Reuters) - Canadian retail sales dropped by 2.4 percent in November from October, the steepest decline in nearly 11 years, and analysts said they expected worse to come as the recession starts to bite harder.
The November decline easily exceeded the 1.5 percent fall expected by market analysts and was the largest since the 4.5 percent plunge recorded in January 1998, when much of Eastern Canada was hit by an ice storm.
The value of sales at gasoline stations plummeted by 14.9 percent from October, reflecting lower prices. Sales at new car dealers fell 3.4 percent.
Excluding the automotive sector, which includes sales of new and used cars and parts as well as sales at gasoline stations, retail sales in November were flat. Overall retail sales in volume terms fell 0.6 percent from October.
“The slide in Canadian retail sales is expected to deepen in coming months, undercut by further job losses, wealth destruction and sagging consumer confidence,” said Doug Porter of BMO Capital Markets Economics.
“Canadian consumers are certainly holding up better than their U.S. counterparts, but they are not indestructible.”
Earlier this week, Statscan reported that the value of manufacturing shipments dropped by a record 6.4 percent in November from October.
“This report adds to this week’s string of dour data out of Canada and suggests that the recession is now entrenched,” said Charmaine Buskas, an economics strategist at TD Securities.
“The Bank of Canada has acknowledged that there are significant headwinds against the Canadian economy and that the economy is slipping. These data prove that beyond a doubt.”
The Canadian central bank is due to release its latest Monetary Policy Report at 10:30 a.m. on Thursday. On Tuesday it cut its key interest rate to a 50-year low and predicted a period of falling prices.
Derek Holt and Karen Cordes at Scotia Capital Research said they suspected that discounting by retailers meant the November figures were in fact worse than they appeared.
“Discounting probably intensified in December, so we’ll be looking for broader evidence of weakness in real retail sales for that month,” they said.
The retail sales data, combined with lower oil prices on Thursday, helped push down the Canadian dollar.
At 10:15 a.m. (1500 GMT), the currency was at C$1.2625 to the U.S. dollar, or 79.21 U.S. cents, down from C$1.2558 to the U.S. dollar, or 79.63 U.S. cents, on Wednesday.
Statistics Canada also released data for the December leading indicator on Thursday, which showed a decline of 0.6 percent from November. It said initial data showed weakening car sales would also pull down the indicator in January.
The central statistics agency will release December inflation data at 7 a.m. on Friday.
Reporting by David Ljunggren; editing by Peter Galloway