The supposedly tapped-out Canadian consumer hasn’t put away the credit card yet, nor taken all her business south of the border.
Statistics Canada reported Friday that retail sales rose a surprisingly strong 1.3% in November, both in terms of sales value and volumes.
That is a massive number, particularly on the heels of five previous months of gains and an upwardly revised 1% increase in October. The consensus had been for a relatively tame 0.4% pickup.
“I wouldn’t count out the Canadian consumer just yet,” said Doug Porter, deputy chief economist with BMO Capital Markets.
“I take the point that it’s going to be difficult for the consumer to spend more than income, but not impossible.”
Scotiabank economist Derek Holt said that because retail sales account for about a quarter of gross domestic product, November’s results will have economists taking out their calculators to revise upward the economy’s end-of-year performance.
“Just the magnitude of the gain is going to have everyone revising higher their fourth-quarter GDP expectations.”
Gains were reported in eight of 11 subsectors, representing roughly 90% of total sales. And nine provinces were in on the spending spree, with Nova Scotia the only wallflower.
The perky numbers helped push the Canadian dollar up 0.54 of a cent to 100.83 cents US in early trading, after three down days.
Many economists had been anticipating another sub-2% quarter at the end of the year, on the heels of a very weak 1% advance in the third quarter.
But after Friday’s Statistics Canada report, analysts were giving more credence to the Bank of Canada’s rosier 2.3% estimate, which is more than double the third-quarter result.
Some, like Holt, think the central bank may even be on the low end for fourth-quarter GDP.
Part of the hesitation about making more definitive estimates is that Statistics Canada is not as current as some countries about tabulating key data. While it was reporting sales for November on Friday, both the U.S. and the United Kingdom had already released data for December. Meanwhile, Canada’s statistical agency won’t be reporting November’s output performance until Jan. 31.
But what data has been released does point to a stronger fourth quarter, say economists, who also believe the momentum has been carried into the start of 2011.
Wholesale sales, employment, and consumer confidence have been tracking north, although manufacturing fell in November. More key, is that the U.S. economy has shown strength that will benefit Canada’s factory and export sectors, Porter said.
Friday’s retail report found overall sales rose to $37.3 billion in November, bolstered by a 3.6% increase at new car dealers.
Gasoline station sales rose 1.4%, while sales at food and beverage stores increased 0.8%. Clothing, sporting goods, hobby, book and music stores also had a good month.
The largest decline occurred at electronics and appliances stores, where sales fell 2.2%.
