Statistics Canada says retail sales up 1.4% in January

Canadian retail sales rose in January, a sign of consumer strength even as inflation continued to push prices higher.

Statistics Canada said retail sales rose 1.4% to $66.4 billion for the first month of 2023, buoyed by gains at motor vehicle and parts dealers as well as gas stations.

The result beat the agency’s early estimate for the month, which had suggested a gain of 0.7% in January.

“Consumers started the new year on a stronger footing,” Ksenia Bushmeneva, an economist with TD Economics, said in a client note.

“A better-than-expected end of 2022 and the start of 2023 has led to upgrades in our consumer spending outlook for the first half of this year.”

But Statistics Canada said its initial estimate for February points to a 0.6% decline for the month.

Though the agency cautioned the early figure would be revised, it suggests consumer resiliency despite higher interest rates and inflation could be wearing thin.

Indeed, debt servicing costs have been moving higher and “much of the pain from higher interest rates on household finances is yet to come,” Bushmeneva said.

“As such, we continue to expect consumer spending to slow significantly in the second half of this year as this headwind intensifies and the labour market slows,” she said.

For January, sales at motor vehicle and parts dealers gained 3.0%, led by higher sales at new car dealers which rose 3.0%. Meanwhile, sales at gasoline stations and fuel vendors increased 2.9% as sales in volume terms fell, but gasoline prices rose.

Core retail sales — which exclude gasoline stations and fuel vendors and motor vehicle and parts dealers — rose 0.5% for the month with food and beverage retailers leading the increase.

Sales at beer, wine and liquor retailers were up 2.3%, convenience retailers and vending machine operators recorded a 6% increase in sales and sales at specialty food retailers climbed 3.3%.

Also contributing to the increase in core retail sales in January were higher sales at clothing, clothing accessories, shoes, jewelry, luggage and leather goods retailers, up 1.8% compared with the same month last year, Statistics Canada said.

The increase was led by a 2.2% hike in sales at clothing and clothing accessories retailers — the largest increase since February 2022.

Sales at sporting goods, hobby, musical instrument, book, and miscellaneous retailers dropped 1.2%, the largest decline to core retail sales for the month. Sales declined in the subsector for five of the seven months preceding January, the agency said.

In volume terms, retail sales rose 1.5% in January.