Today's Report (12/21/2021)

Retail sales were up 1.6% to $57.6 billion in October. The increase was led by higher sales at motor vehicle and parts dealers (+2.2%), as new car dealer sales (+2.8%) rebounded. Sales increased in 7 of 11 subsectors, representing 59.9% of retail trade. Given the rapidly evolving economic situation, Statistics Canada is providing an advance estimate of retail sales, which suggests that sales increased 1.2% in November. Owing to its early nature, this figure will be revised. This unofficial estimate was calculated based on responses received from 40.9% of companies surveyed. The average final response rate for the survey over the previous 12 months has been 90.2%.

Core retail sales were up 1.5% in October. The increase was led by higher sales at general merchandise stores (+2.8%) as sales rose for a fifth consecutive month. Sales at sporting goods, hobby, book, and music stores (+17.5%) were up for the second month in a row. The increase coincided with the continued resumption of many recreational and school-based sporting leagues in the fall. Also contributing to the increase were higher sales at building material and garden equipment and supplies dealers (+3.2%). Sales were up for a third consecutive month, following four months of declines from April to July 2021.

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.