Grocery store sales down in January, Statistics Canada says

A retreat in new car purchases helped push the country's retail sales down 0.3 per cent to $67 billion in January, Statistics Canada said Friday (March 22).

The national data agency revealed overall retail sales were down in three of nine subsectors it tracks with sales at motor vehicle and parts dealers falling 2.4%, the category's first decline in five months. Sales at new car dealers fell 3%, while used car dealers gained 4.5%.

The numbers cover a period when Canadians are usually taking stock of holiday spending and sometimes curtailing larger purchases to help them handle credit card payments due for gifts, gatherings and other December festivities.

Despite the drop in overall retail sales, economists said January had a bright spot: core retail sales that came in higher than many of their expectations.

Core retail sales — which exclude gas stations and fuel vendors, and motor vehicle and parts dealers — rose 0.4% in the first month of 2024. 

The largest decrease in core retail sales in January came from food and beverage retailers ( down 0.9%). Sales were down in all four store types, led by lower sales at supermarkets and other grocery retailers (except convenience retailers) (down 0.8%).

The rise in core retail sales was largely attributable to higher sales at sporting goods, hobby, musical instrument, book, and miscellaneous retailers, which saw a 3% increase.

"That points to a solid momentum in spending," Maria Solovieva, an economist with TD, wrote in a note to investors.

Some of that momentum is coming from what Solovieva calls a "wealth effect," where recent gains in the financial markets and tepid growth in liabilities have pushed up Canadian households' wealth. 

Also fuelling the momentum, she said, is the cost of many goods and services easing. Statistics Canada announced Tuesday that the annual inflation rate fell to 2.8% in February amid sharp declines in cellular and internet services, as well as slower grocery price growth.

Andrew Grantham, a CIBC senior economist, noticed weather is playing a role too.

Some of the increases, including those in sporting goods, building and garden stores, were at least partially attributable to unseasonably warm pockets of weather in several regions in Canada, he said.

"While clothing sales fell in nominal terms, that was driven by lower prices and in volume terms, sales were up on the month," Grantham said.

"A further large monthly increase in the volume of sales at gasoline stations is another sign that mild weather may be impacting the latest retail sales figures."

In volume terms, Statistics Canada said retail sales rose 0.2 per cent in January.

Shelly Kaushik, an economist with BMO, said in her note to clients, "those higher volumes would support economic growth to start the year."

Looking ahead, Statistics Canada's advance estimate of retail sales for February suggests sales increased 0.1% for the month, though it cautioned the figure would be revised.

Grantham foresees consumer spending posting only marginal growth and said per capita declines are probably on their way, but later this year, there could be an acceleration if the interest rate is cut.

With files from Canadian Grocer staff