Today's Report (11/19/2021)

Retail sales were down 0.6% to $56.6 billion in September. The decline was led by lower sales at motor vehicle and parts dealers (-1.6%) as new car dealer sales (-2.8%) continued to struggle amid global supply shortages for semiconductor chips. Sales decreased in 7 of 11 subsectors, representing 63.5% of retail trade. In volume terms, retail sales decreased 1.1% in September. Retail sales were up 2.7% in the third quarter, the largest increase since the third quarter of 2020. In volume terms, quarterly sales were up 1.5%.

Core retail sales decreased 0.3% in September. This comes as the Bank of Canada's quarterly monetary policy report noted that as the impacts of the COVID-19 pandemic recede and confidence rises, spending on services such as travel and accommodation is expected to continue to strengthen, while growth in demand for goods may moderate.

What Is It?

The Canadian retail sales data reflect the total receipts of the retail sector in Canada over the period under consideration.

Retail sales account for the goods component of consumer spending, with services such as healthcare, education, travel, and hotel accommodation making up the other portion.

Why Investors Care?

With consumer spending a large part of the economy, market players continually monitor spending patterns. Data are available both for total retail sales and those excluding autos and for 16 different store specializations. Since autos account for over 25 percent of retail sales, the sector can have a pronounced impact on overall sales given their volatility. Retail sales are used to estimate the goods portion of personal consumer expenditures in the quarterly GDP accounts, accounting for about 50 percent of the total.

The pattern in consumer spending is often the foremost influence on stock and bond markets. For stocks, strong economic growth translates to healthy corporate profits and higher stock prices. For bonds, the focus is whether economic growth goes overboard and leads to inflation. Ideally, the economy walks that fine line between strong growth and excessive (inflationary) growth.

Retail sales not only give you a sense of the big picture, but also the trends among different types of retailers. Perhaps apparel sales are showing exceptional weakness but electronics are soaring. These trends from the retail sales data can help you spot specific investment opportunities, without having to wait for a company's quarterly or annual report.

What Is The Effect On the market?

CURRENCY - An overall strong retail sale report could spell trouble for the CAD because many of these goods are imported.

STOCKS - Healthy retail sales are good for stocks because it can increase corporate revenues and profits, however weak retail sales or uncertainties can place downward pressure on the CAD.

BONDS - Jumps in retail sales could suggest that consumers are in a buying mood, potentially accelerating economic growth. A weak report could set a stage for bond prices to rise.