Statistics Canada retail sales figures for December 2014 show a two per cent drop in sales, the steepest decline since 2010.
Lower gas prices account for part of the reduction, with Canadians spending 7.4 per cent less at the pump than they did a year earlier.
But they didn’t turn around and spend their savings at the mall. Retail sales excluding gasoline were still down 1.2 per cent by volume.
And the sectors most associated with holiday shopping also fell, with spending on clothing and accessories down 5.6 per cent.
Canadians were willing to spend more freely on beer, wine and liquor, which saw sales rise by four per cent and on specialty food, with sales up 3.1 per cent.
BMO analyst Robert Kavcic says shoppers may be shifting their spending into November, to take advantage of Black Friday sales.
November retail sales rose 0.4 per cent in 2014.
“Black Friday is a relatively new phenomenon in Canada and, as a result, the prior two years saw strong November sales activity followed up by declines in December (especially in areas like electronics),” Kavcic said in a note to investors.
However, Kavcic had predicted a 0.4 per cent decline in December sales, rather than the much steeper two per cent drop that occurred.
BMO economist Jonathan Bendiner pointed to the deep drop in sales in oil-producing provinces such as Alberta and Saskatchewan, saying households were already tightening their spending habits in December in anticipation of the impact of lower oil prices. For December retail sales in Alberta were down by 2.5 per cent and in Saskatchewan by 3.6 per cent.
Bendiner expects consumer spending to moderate over the course of 2015, even as the Bank of Canada’s rate cut ensures credit is cheap.
"Lower gasoline prices are...estimated to save the average Canadian household around $875 at the pump this year. On the other side of the coin, lower oil prices will also weigh on incomes and act as a headwind to consumer spending. Canadian households are also carrying high levels of debt, which will keep consumer spending in check in 2015," he said.