OTTAWA - Canadian shoppers reined in spending before Christmas this year as retail sales slumped 0.2 per cent in December despite apparent deep discount sales from stores.
The fall-off followed a revised 0.4 per cent pop in November, an indication that shoppers had both completed their Christmas shopping early and were cautious consumers during the holiday season, analysts said.
"The overall story here is that after a nice bounce out of the recession, Canadian consumer spending is cooling, and I think that will be the dominant story in 2012," said Douglas Porter, deputy chief economist with BMO Capital Markets.
"In a nutshell, disposable income growth is very modest and likely to become more modest as job growth slows down and we begin to see various forms of government restraint. That will likely weigh on disposable incomes as well."
The Bank of Canada has warned for some time that rising indebtedness by Canadian households would pose a problem to growth. With debt to income having reached a record 153 per cent, that dynamic may be beginning to unfold, analysts said.
The analogy appears to be reflected in a RBC post-holiday spending poll released at about the same time as the Statistics Canada data. It found 69 per cent of respondents surveyed said they managed to keep their Christmas spending in check.
Those respondents listed high levels of debt and wanting to keep spending within a budget they can afford as key reasons for not going out on a binge. Only 31 per cent said they spent more than they intended during the holidays.
"It’s encouraging to see that the majority of Canadians kept an eye on personal debt and took a more cautious approach to holiday purchases,” said Richard Goyder, vice president of personal lending at RBC.
December's result was not all bad. Real sales in terms of volumes were flat, meaning that all the losses were due to retailers discounting prices in order to attract customers.
The discounting also showed up in the steep 0.6-point drop in the inflation rate to 2.3 per cent during December reported last month. The consumer price index has since risen somewhat to 2.5 per cent.
In total, sales were worth $38.6 billion to retailers in the final month of 2011.
In keeping with the theme, stores that usually cater to holiday gift-givers were among the worst performers.
Sales at department stores were down 1.5 per cent for a fourth consecutive month and sporting goods, hobby, book and music store saw sales drop for the first time in five months, down 3.4 per cent in December.
Electronics and appliance store sales were down 2.8 per cent, falling for the second month in a row, while sales at clothing and clothing accessories stores fell 0.8 per cent after rising in October and November.
Sales at motor vehicle and parts dealers slipped 0.1 per cent, the first decline in five months. Gasoline stations reported a 1.1 per cent decrease in sales after four consecutive months of increases.
"Surprisingly, furniture/building material store sales were strong, in contrast to softness in those categories in recent months," noted CIBC World Markets economist Emanuella Enenajor.
Despite the decrease, retail sales are still likely to be a modest contributor to gross domestic product in the fourth quarter when the agency releases the final report card on 2011 next week.
Porter, like many analysts, believe the fourth quarter will see a modest increase in GDP of between 1.5 and 2.0 per cent, following the third quarter's strong 3.3 per cent expansion. For the year as a whole, analysts are expecting Canada to have recorded a growth rate of about 2.4 per cent.