WATCH: New numbers from StatsCan on Canadian retail sales show that Canadians spent way less over Christmas – the largest decline since 2010. As Reid Fiest reports, the sales slump hit every province.
It turns out Canadians aren’t spending cash saved on lower pump prices — they’re pocketing it.
Consumer spending plunged in December, Statistics Canada said Friday, as gas prices fell and holiday shopping was restrained. “Most store types typically associated with holiday shopping registered weaker sales in December,” the federal statistics agency said.
Retail sales fell two per cent overall, the largest decline since April 2010.
The drop from November retail sales was worse than expected, with economists suggesting retail sales would fall less than one per cent caused by a nine per cent slide in pump prices.
But the fall in spending went beyond the drop in the amount spent on gas. Excluding automotive sales, retail sales from other areas, like clothing, electronics and general merchandise declined 1.3 per cent.
Both the headline (2.0 per cent) and ex-auto figures “were materially weaker than was expected,” Nick Exharos, economist at Canadian Imperial Bank of Commerce, said.
“Weakness was across the broad, with nearly every major category lower,” Benjamin Reitzes, senior economist at BMO said.
In all, nine of 11 categories of retailers tracked by Statscan reported lower sales.
The drop in gas prices has been widely seen as a positive for Canadian consumers and retailers, generating billions in spare cash that experts have suggested will be spent elsewhere. But the December reading indicates those dollars aren’t being diverted to other areas of spending.
Paul Ferley, assistant chief economist at RBC said there was “little evidence as yet that households are spending the savings from lower gasoline prices.”
“Though they’re saving some money at the pumps, Canadians aren’t in any hurry to open their wallets elsewhere,” CIBC’s Exharos said.
One area were sales climbed: grocery sales. Food sold at stores jumped 1.0 per cent as supermarkets passed through higher costs from imported produce and meat to shoppers.
The dollar’s dive alongside oil prices has quickly fanned costs on perishable foods, a process that’s expected to continue throughout the year, according to experts.
Black Friday effect
Electronics and clothing sales were down sharply in the month, declining 9.2 per cent and 5.6 per cent, respectively.
The hit to categories that have historically been stronger in December, as shoppers rush to get gifts, are likely a result of Black Friday sales events taking place with greater frequency among more Canadian retailers in November, experts said.
“Before getting too downbeat on Canada, it’s clear that the weakness in this report is at least partially due to trouble seasonally adjusting the impact of Black Friday. Shoppers are spreading their holiday shopping over a longer period, with Black Friday boosting November and dragging on December,” BMO’s Reitzes said.
Economy experts at TD Bank and elsewhere suggested the sharp spending pullback was also a response to the rapid drop in oil prices, which began to ripple across the economy in December beyond lowering gas prices. A slew of energy firms in Alberta and elsewhere announced sharp reductions in investment plans and began implementing layoffs.
“The impact from the plunge in oil prices over the second half of 2014 is clearly on display in today’s report,” TD economist Jonathan Bendiner said.