Canada: Momentum in retail sales proved resilient in October – CIBC

Data released on Friday showed that retail sales rose 0.4% in Canada during October.  Analysts at CIBC, point out that it seems like rising Covid-19 cases had less of an effect on consumer spending in October than had been feared.

Key Quotes: 

“Momentum in Canadian retail sales proved resilient in October, driven in part by some surprising strength in new car sales. While the pace of growth seems to have stalled in November according to the flash estimate from Statistics Canada, the report doesn’t capture some of the largest online retailers which might have gained market share during the month as Covid cases rose and shutdowns were ordered. As a result, the trend in merchandise sales is likely even healthier than what’s seen in this release.”

“The stalling of sales in November is somewhat of a disappointment, given the strong labour market data for the month. However, these readings on retail sales don’t capture some of the largest online sellers, which might have been gaining market share as Covid cases were rising and shutdowns were ordered. So the trend in total merchandise purchases could have actually been healthier than what’s shown in today’s report.”

“It seems like rising Covid cases had less of an effect on consumer spending in October than had been feared. It’s difficult to tell how much that weighed on purchases in November, given that some sales likely migrated towards online retailers which aren’t captured in the report. So the flat early estimate for the month probably understates the trend in actual merchandise purchases. That will be important to keep in mind when trying to interpret upcoming retail sales readings, as rising Covid cases and further shutdowns likely pushed spending even more towards online retailers just as the holiday shopping season got into full swing.”