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Retail sales dropped 1.8 per cent in December to $57B, Statistics Canada says

Sales were down in eight of 11 subsectors, representing 62.9 per cent of retail trade

Canadian retail sales fell 1.8 per cent to $57 billion in December as the spread of the Omicron variant and severe flooding in British Columbia and the Atlantic provinces disrupted transportation, retail operations and sales, Statistics Canada said Friday.

It’s the largest decline recorded since last April, when regions across the country implemented heightened COVID-19 restrictions, the agency said.

The drop was even more significant after stripping away the impact of higher prices, with retail sales volumes down 2.5 per cent in December, TD Economics economist Ksenia Bushmeneva said.

“Retail sales ended the year on a weaker footing, with public health restrictions weighing on mobility and spending in December,” she said in a client note.

Sales were down in eight of 11 subsectors, representing 62.9 per cent of retail trade, Statistics Canada said.

Sales at clothing and clothing accessories stores were down 9.5 per cent while furniture and home furnishings stores recorded an 11.3 per cent drop in sales.

Core retail sales — which exclude gasoline stations and motor vehicle and parts dealers — decreased 2.4 per cent, the agency said.

Sales at gasoline stations fell 3.2 per cent in December, the first decrease in three months as tighter public health restrictions due to the Omicron variant weighed on gasoline demand.

Retail e-commerce sales also slipped in December, down 14.2 per cent year-over-year to $4.1 billion in December or 6.5 per cent of total retail trade.

Statistics Canada’s preliminary estimate for January pointed to an increase in retail sales of 2.4 per cent for the month, but the agency cautioned the figure would be revised.

Easing restrictions and gradually improving supply chain bottlenecks should lead to an improvement in stores’ traffic and retail sales over the next couple of months, Bushmeneva with TD Economics said.

Yet beyond the initial rebound, she said the outlook on retail sales is mixed.

“Easing public health restrictions are expected to prompt consumers to redirect their spending away from goods and toward services, such as travel, dining out, and entertainment,” Bushmeneva said.

“A rebound in spending on services, alongside rapidly rising consumer prices and higher interest rates, will leave less wiggle room in household budgets to spend on goods this year.”

The Canadian Press

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