Canada: Goods spending got a major boost from car sales in Q4 – National Bank of Canada

November's retail sales report was rather disappointing. Not only did good spending stagnate over the month but, as prices rose, this translated into a 0.4% decline in sales volumes, NBC ecnomists report.

Canada car sales in Q4 hive a major boost to goods spending

"Outlays of items correlated with the housing market continued to fall, as did spending on food. On a more positive note, auto sales saw another solid expansion in November and were on track to grow by no less than 19.1% in annualized terms in the fourth quarter (18.2% in real terms). These good times may not last, however."

"Remember that several subsidy programs for the purchase of electric or hybrid vehicles expired in January, which probably encouraged many car buyers to pull the trigger at the end of last year. We therefore expect a significant slowdown in this category in the first quarter of 2025. But in the meantime, the large increase in spending at dealerships will translate into a significant contribution to Q4 GDP growth from goods consumption."

"Including the December advance reading, we indeed estimate that retail sales volumes rose by no less than 4.9% annualized in Q4, the best performance in a year. Excluding cars, however, sales volumes may have contracted during the quarter, highlighting the extent to which sales were driven by a single category in the final quarter of last year."