Canadian retail gross sales jumped 2.5% in December to $69.6 billion, marking the strongest month-to-month acquire since mid-2022, based on Statistics Canada.

The broad-based enhance, spanning all 9 subsectors, was led by meals and beverage retailers (+3.5%) and motorized vehicle and elements sellers (+1.9%). Core retail gross sales, which exclude gasoline stations and motorized vehicle and elements sellers, additionally climbed 2.5%, rebounding from a 1.0% decline in November.

A GST holiday-fuelled spending spree

Analysts extensively attribute December’s retail power to the GST/HST holiday, which started on December 15, prompting many customers to postpone purchases till mid-month.

Desjardins famous that December’s retail efficiency lifted the three-month annualized charge of actual gross sales development to 10.2%, with per capita spending rising in each nominal and actual phrases after early 2024 weak point.

However whereas December noticed a surge in spending, it seems to have been short-lived. January’s flash estimate factors to a 0.4% decline in retail gross sales, reinforcing the view that the tax vacation’s impression was short-term.

Wanting forward, broader financial uncertainty might weigh on shopper confidence, based on Tony Stillo, Director of Canadian Economics at Oxford Economics.

“We’ll have to attend and see the extent to which heightened uncertainty from Trump’s threatened commerce conflict with Canada causes households to curtail spending, particularly for big-ticket gadgets,” he wrote.

CIBC‘s Andrew Grantham additionally warned that family spending in Q1 might take a success amid rising commerce tensions.

“Latest tariff uncertainty could have resulted in households tightening the purse strings once more if there was concern concerning employment prospects,” he wrote. “We count on shopper spending to gradual within the first half of this 12 months, earlier than accelerating once more in H2 and 2026 if a worst-case tariff state of affairs is prevented.”

Implications for the Financial institution of Canada

December’s stronger-than-expected retail gross sales add to the case that the Bank of Canada will maintain charges regular in March, reinforcing market odds that had already positioned a minimize at simply 30%.

“It appears Santa had loads of presents for Canadians in December, because it’s troublesome to seek out any regarding spots on this report,” wrote BMO economist Shelly Kaushik. “Even when the momentum fades into the brand new 12 months, these figures add to the argument for the Financial institution of Canada to pause at subsequent month’s assembly.”

It’s a view shared by others, together with Desjardins senior economist Maëlle Boulais-Préseault, who factors out that This fall annualized actual GDP development is monitoring at 1.9%, barely above the BoC’s January forecast of 1.8%.

Nevertheless, Boulais-Préseault expects that top housing prices, a wave of upcoming mortgage renewals, and the opportunity of a commerce conflict with the U.S. might drag down shopper confidence and spending later in 2025.

“As such, whereas we count on the Financial institution to take a pause in its rate-cutting cycle in March, it’s seemingly only a temporary pitstop because the central financial institution is prone to return to charge cuts thereafter,” she wrote.

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Final modified: February 21, 2025