-Krishen Rangasamy, senior economist at the National Bank of Canada
Canada's retail sales dropped at the fastest pace in over four years in the festive period, as gasoline prices plummeted and holiday shopping was subdued. Statistics Canada said sales declined 2.0% to $42.1 billion, the most since April 2010 and considerably below economists' expectations for a 0.4% fall. Meanwhile, core retail trade, which excludes volatile automobile and parts sales, plummeted 2.3% during the measured month, compared with expected 0.8% decline. Gas station sales dropped the most in six years in December, falling 7.4%, as gasoline prices continued to decline for the sixth month in a row. Apart from plummeting oil prices, overall consumer activity was tepid in December, with holiday shopping failing to provide any support. Clothing and clothing accessories stores' sales fell 5.6%, while receipts in electronics and appliance stores also declined 9.2%.
Meanwhile, other recently released fundamentals for December have surprised on the upside, providing support to the upcoming monthly GDP data. Nevertheless, growth expectations have been faltering, as lower oil prices are expected to derail the Canadian economy due to widespread negative effects. The Bank of Canada responded in January by unexpectedly lowering its key interest rate to 0.75% and downgrading its inflation and growth outlooks.
© Dukascopy Bank SA