After months of consumers feeling the pressure from high prices and borrowing costs, September’s increase in retail sales is a welcome sign.

However, experts caution that it doesn’t signal a lasting recovery just yet.

CIBC economist Katherine Judge pointed out that while September’s rebound is encouraging, it merely reflects a recovery from earlier losses rather than a new upward trend.

“Retail sales have put in a good quarter, but don’t break out the champagne just yet, given that this comes after two quarterly declines in volume terms,” Judge wrote in a research note. “It’s too early to establish a higher trend in spending, and there is ample lost ground to make up still in per-capita terms.”

Sales growth was led by increases in six of nine subsectors, with food and beverage retailers seeing the largest gains. Core retail sales, which exclude gasoline stations and motor vehicle and parts dealers, saw a stronger 1.4% rise.

Regionally, Alberta saw the strongest performance with a 2.3% increase in sales, while Ontario experienced a slight decline of 0.1%. In Montreal, sales were up 0.3% while Toronto saw no change from the previous month.

Continued rebound in consumer spending expected in October

Looking ahead, StatCan’s early estimate for October points to a 0.7% increase, driven largely by home-related purchases.

Judge expects the positive momentum to continue into the fourth quarter. “The rebound is likely to be sustained, bolstered by home improvement trends and seasonal demand,” she added.

Additionally, the proposed GST/HST ‘tax holiday’ announced this week by the federal government, set to run from mid-December to mid-February, is expected to provide a significant boost to consumer spending during the exemption period, though Judge notes it could dent activity in November as consumers delay certain purchases.

“This holiday shopping season may have a bit more sparkle than expected,” noted TD economist Maria Solovieva. “The Bank of Canada may have gotten what it wanted: a rebound in consumption growth.”

October’s final retail sales data will be released on December 20, 2024.

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Last modified: November 22, 2024