Data released on Friday showed an increase in November retail sales in Canada of 0.7%, below the 1.2% of market consensus. Analysts at CIBC, point out the advance was modest in November, and warn that all of that ground and more appears to have been given back in December.

Key Quotes: 

“Canadian retail sales posted a modest advance in November, but all of that ground and more appears to have been given back in December. The increase of 0.7% in November was a little weaker than the advance estimate and the consensus forecast (+1.2%), and reflected only a modest 0.2% advance in volume terms. Meanwhile the early estimate for a 2.1% decline in December suggests that sales weakened fairly severely, even before the worst of the Omicron-related cases and restrictions hit.”

“While we were expecting to see weakness in December, the decline appears to be a little larger than we were anticipating. If accompanied by disappointments in advance data for manufacturing and wholesaling next week, it could mean that December GDP was weaker than expected.”

“Signs of softening in the economy before the worst of the case counts and restrictions hit may also tip the scales slightly in terms of the Bank of Canada holding rates next week and waiting for signs of a recovery before hiking.”