Canadian retail sales rose a moderate 0.4% in all-important December, reversing a 0.5% drop in the prior month, and completing a nifty comeback from the dismal conditions of a year earlier. The midsized gain left sales up an impressive 6.7% from the rock-bottom lows hit at the end of 2008. That represents a very neat bit of symmetry, as sales fell 6.8% y/y at the depths in December 2008.
Excluding autos, sales also managed to rise 0.4%, after a 0.2% drop in November. A big pullback in both food and drug stores-usually two areas that can reliably be counted on for steady gains-
undercut activity. As well, sales at building and home supply stores fell 1.2%, although with a 6.4% y/y gain, this remains the strongest non-auto sector. In volume terms, real retail sales notched a solid 0.6% advance, and were up at a healthy 4.7% annual rate for all of Q4.
While that’s a bit off the Q3 rise of 5.6%, it still suggests that real consumer spending made another solid contribution to overall GDP growth last quarter—we look for a 2.6% rise in real spending, after the 3.1% advance in Q3. Regionally, all 10 provinces have managed to rise above year-ago levels (although just barely in Alberta).
In a separate release, StatsCan reported that the number of Canadians receiving employment
insurance benefits fell for the third consecutive month in December, dropping 5.1%. Initial claims also fell and are now down from a year ago for the first time since the spring of 2008. While not new news, the steady improvement in EI totals in the second half of 2009 gives some comforting confirmation to the employment figures that the labour market is indeed healing steadily.
The Bottom Line: Today’s raft of economic data adds to the growing body of evidence that the
recovery is taking more firmer roots. Retail sales continue to gradually grind ahead, putting the
nightmare of late 2008 well behind us. As well, the labour market is slowly but steadily improving, setting the stage for further gains in consumer confidence and spending. The virtuous circle of recovery appears to be taking hold.
Douglas Porter
