Canada: Consumer outlays on goods came in stronger than expected in October – NFB

Data released on Tuesday showed Retail Sales rose in Canada 1.6% in October, surpassing expectations. According to analysts at the National Bank of Canada, the rebound at car dealers helps lift retail sales further above pre-crisis level. They see October’s retail sales report heralding a strong end of the year for consumer spending.

Key Quotes:

“Retail sales rose 1.6% in October, quite a bit more than the median economist forecast calling for a 1.0% gain. Adding to the good news, the prior month’s result was revised upwards, from -0.6% to -0.3%.”

“The near-term outlook also appeared encouraging; the federal statistics agency anticipated another healthy gain in retail sales in November, putting paid to fears of a decline caused by floods in British Columbia. As for the longer-term horizon, it has become a lot more uncertain, the unprecedented surge in COVID-19 cases in the country having forced the reintroduction of social distancing measures in several provinces. While this could weigh on consumer spending during the holiday season, we believe the bulk of the impact of these measures will be felt early in the first quarter of 2022.”

“Consumption on services is more at risk but a change in the composition of goods spending could also be observed, with households diverting their spending away from categories necessitating close contacts and towards those that do not require any interaction.”