Canada December retail sales up 0.9%, seen falling in January

By Promit Mukherjee

OTTAWA (Reuters) -Canada's December retail sales slightly beat expectations as people spent more on cars, food and beverages, and at supermarkets during the holiday season, data showed on Thursday, but likely declined at the start of the year.

Retail sales grew by 0.9% in December from November, more than a forecast for a 0.8% gain, from a flat reading in November, which was upwardly revised from -0.2% previously, Statistics Canada said.

January's preliminary estimate pointed to a 0.4% decline on the month, Statscan said.

"We continue to expect the Canadian economy to slow in the first half of this year as more households feel the impact of higher interest rates," said Tiago Figueiredo, an economist with Desjardins Group, in a note.

The BoC has held borrowing costs at a 22-year high of 5% since July in its efforts to see sustained signs of cooling prices.

December retail sales totaled C$67.3 billion ($49.86 billion) and saw an increase in five out of nine sub sectors.

The strong numbers in December means shoppers were net spenders in eight out of 12 months of 2023, reflecting that high interest rates have still not completely dampened consumer spirits.

"This supports the surprisingly strong Q4 GDP estimate," Shelly Kaushik, economist with BMO noted in a report.

Canada's economy is likely to have expanded by 0.3% in December, translating into an annualized growth of 1.2% in the fourth quarter and reversing the previous quarter's contraction, preliminary estimate by StatsCan said last month.

The final GDP figures will be published on Feb 29, a week before the Bank of Canada's (BoC) next rate decision.

In volume terms total retail sales grew by 0.8%, Statscan said.

Motor vehicle and parts dealers, which accounts for a quarter of the total sales, contributed the most to the overall trade sales with a jump of 1.9%. Excluding this sub-sector, retail trade grew by 0.6%, data showed. It had been forecast to grow 0.7%.

The second biggest bump in sales came from food and beverage retailers where trade grew by 1.5% on a monthly basis while the biggest drop came from furniture, home furnishings, electronics and appliances retailers. This sector saw a drop of 2.7%.

($1 = 1.3498 Canadian dollars)

(Reporting by Promit Mukherjee and Dale Smith; Editing by Chizu Nomiyama)