02/22/2013 09:28 EST

Retail Sales Canada: Holiday Season Brought Unexpected 2.1-Per-Cent Plunge


Retail sales over the crucial holiday season plunged a much larger than expected 2.1 per cent, Statistics Canada reported Friday.

Economists had been expecting a much smaller 0.3 per cent decline, and the latest numbers suggest Canada's economy rapidly lost steam at the end of 2012.

It was the largest decline in nearly three years, and StatsCan's chart showing retail sales growth for the past five years clearly shows a slowing trend in recent months, with an alarming downward dip in the last months of 2012.

Many experts are now suggesting that Canada's record-high levels of household debt are forcing financially strained consumers to pull back on spending.

What could be happening is households are using more income to pay down debt and as a result have less disposable income to undertake purchases, and that could be contributing to this moderate slowing in spending," RBC assistant chief economist Paul Ferley told The Huffington Post Canada last month.

On a year-over-year basis, retail sales in December were down 0.7 per cent from December, 2011. That compares to a 4.8-per-cent year-on-year jump in the United States.

Motor vehicle sales led the decline, falling 6.4 per cent. General merchandise trade saw a 3.7 per cent drop, with department stores logging a stunning 9.6 per cent decline.

But CIBC economist Emanuella Enenajor noted in an email to clients that some of the drop may have been the result of sales being pulled forward to November, as more Canadian retailers offer Black Friday and Cyber Monday sales, which take place in November.

Data provided by debit and credit card processor Moneris Solutions Corp. show a big increase in spending on November’s Black Friday and Cyber Monday this past holiday season, up 6.5 per cent and 22.5 per cent respectively compared with 2011 as the two shopping days continue to grow in popularity in Canada.

-- With files from Sunny Freeman

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