first time in seven months. In December, retail sales nudged down M/M
by 0.2% to reach $35.5 billion, as a bit of payback for the
significant gain of 1.5% posted in November.
In real terms, retail sales also declined in December by 0.4% relative
to the month prior.
Five out of eleven categories reported M/M decreases in December. Of
note, motor vehicle and parts dealers (-2.8%) and sporting excellent
stores (-1.9%) saw the largest declines. By contrast, furniture and
home furnishing stores (+1.9%) and gasoline stations (+7.6%) saw their
sales activity inch up.
After stripping out the often volatile auto category, core retail
sales place forth a better showing with 0.6% M/M gains realized in
December.
Regionally, losses were widespread with seven out of ten provinces
posting lower activity in December relative to the previous month. New
Brunswick (-2.9%) and British Columbia (-2.2%) realized the largest
M/M losses, with Saskatchewan (-1.9%) and Prince Edward Island (-0.6%)
not too far behind. Québec (0.8%), Alberta (0.5%) and Ontario (+0.0%)
were the only provinces not to see declines.
On an annualized quarterly basis, Q4 national retail sales were up
2.5% in nominal terms relative to those posted in Q3 and a milder 1.3%
in real terms.
*Key Implications*
Retail sales numbers in November and December account for nearly one
in five dollars earned by retailers all year. This month's data
confirms that November's impressive consumer spending activity did not
involve forward into December. When averaging the two months out, we
conclude that retailers will close their books on a excellent holiday
season, but not a fantastic one.
Overall, retailer weigh sheets in 2010 were weighed down by intense
price struggle, an extended lull in consumer activity mid-way through
the year, and an average holiday season. As a whole, retail sales were
up 4.5% Y/Y, suggesting that retailers will close their books on an
average year.
Impressive household spending performances and higher-than-expected
international trade numbers in Q4 place upside risk to our estimate
for fourth quarter real GDP growth of 2.3%. To reflect these recent
developments, we are now calling for real growth Q/Q annualized to
exceed 3.0%.
Even with the solid handoff into 2011 that we saw in this past
quarter, the contribution of consumer spending to economic growth will
wane as interest rates slowly inch up over the next eighteen months.
This subdued pace of activity will be most acute for large ticket bits
and pieces (e.g., house-related bits and pieces, vehicles, durable
goods). With this in mind, we expect household spending to grind
forward at a much moderate pace, success a 3.1% ceiling in Q1 2011
that will not be revisited again for some time to come.
Source: ActionForex.Com
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