December Retail Down

Statistics Canada Release

Retail sales took a hit in December as shoppers reduced their spending in stores by 1.4% to $29.2 billion, after essentially no change in November (-0.1%). Nonetheless, December's retail sales were 6.6% higher compared with the same month of 2003.

Most of the overall drop in December was accounted for by pronounced sales declines at new car dealers and beer, wine and liquor stores. Also, the increasing popularity of gift cards, which are considered as sales only when they are redeemed, may have played a role in December's weak retail sales.

Once prices are taken into account, constant dollar retail sales fell by 1.5% in December and 0.4% in November.

These poor holiday sales results came on the heels of six months of uninterrupted sales growth. In fact, retailers have seen their monthly sales rise nine times in 2004, after experiencing a period of declines in the last four months of 2003. Previously, retail sales had generally been increasing since the fall of 2001.

Overall, retailers experienced their fifth best annual sales gain of the last ten years in 2004. Retail sales advanced 5.0% in 2004 compared with 2003, when sales rose 3.8%. Inflationary pressures on retail activities have been moderate in the last two years, with annual sales growth, in constant dollars, reaching 4.1% in 2004 and 3.0% in 2003.

The most severe sales declines in December were in the food and beverage sector (-2.7%), in pharmacies (-2.4%) and in the automotive sector (-2.0%). Consumer spending was also down in the building supplies (-1.5%) and general merchandise (-0.5%) sectors.

Bucking the trend, stores classified in the miscellaneous sector posted the strongest sales gain (+2.1%), followed by the clothing (+1.1%) and furniture (+0.3%) sectors. The miscellaneous category includes retailers such as office supply, sporting goods, hobby, music and book stores.

Retail sales fell in all provinces in December, except in British Columbia (+0.7%) and Newfoundland and Labrador (+0.9%). Consumer spending in retail stores dropped by more than 2.0% in Alberta (-2.1%), Nova Scotia (-2.6%), New Brunswick (-3.0%) and Quebec (-3.7%).

Retailers in British Columbia have been enjoying strong sales increases since the beginning of 2004, while those in Newfoundland and Labrador posted revived growth in the last five months of the year.

Total employment remained essentially unchanged for a third consecutive month in January, while housing starts dropped to their lowest level in 12 months. Housing starts fell 13.8% in January after reaching their highest level in 17 years in 2004. The number of new motor vehicles sold in January is expected to fall by about 1% compared with December, according to preliminary results from the automotive industry.