Early estimates show the sales tax holiday helped boost retail sales in December. However, just before that, November proved to be a relatively lacklustre month of spending. Spending waned early on in 2024 as tight financial conditions weighed on households. As inflation came down and economic conditions weakened, the Bank of Canada (BoC) began lowering interest rates, which seems to have reignited consumer spending.

• Retail sales were largely unchanged in November, posting no growth (0.0%). A Bloomberg survey showed economists expecting a 0.2% increase. Retail sales had risen for four straight months before November.
• Sales at motor vehicles and parts dealers increased in November. Sales at gasoline stations and furniture stores also rose over the month. This was offset, however, by a drop in sales at food and beverage retailers. Online sales declined by 1.2% over the month.
• Consumer spending is a key driver of economic growth in Canada. As spending pulled back earlier in 2024, economic growth slowed. The BoC began lowering interest rates in June, which appears to have eased the burden on Canadian households, resulting in higher spending.
• The sales tax holiday supported spending in December. Statistics Canada estimated that retail sales rose by 1.6% in December, which would be the largest increase since May 2022.

Despite the hiccup in November, retail sales grew at a relatively robust pace over the second half of 2024. The BoC hopes the increase in consumer spending will also raise business spending to meet the increase in demand. Canada’s economic outlook remains relatively shaky, with tariffs from the US likely coming soon. What impact these tariffs will have on consumer and business activity is yet to be seen. However, a strong Canadian consumer might help support the economy.

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