Canadian shoppers spent more than expected in December, according to Statistics Canada, and one expert says the pickup in sales is due to lower interest rates and recent job growth, which have eased the pressure on consumers.
StatCan reported on Friday that Canadian retail sales surged by 2.5 per cent to $69.6 billion in December, the largest monthly increase since 2022, topping an earlier estimate suggesting a 1.6 per cent gain.
“Canadians capped the holiday shopping season in high style, spending at the fastest rate at retail outlets in more than two years,” Sal Guatieri, senior economist and director of economics at BMO Economics, told BNN Bloomberg in a Friday interview.
“That strength cut across all major subsectors and all provinces and territories… what these numbers tell us is that Canada’s economy is picking up, and it’s being led by the consumer. No surprise, Canadian consumers are responding to these lower interest rates.”
Guatieri said consumers and their pocketbooks were hit hard and fast when the Bank of Canada first started raising its overnight rate in 2022, and they are now seeing relief at a similar rate, leading to the sales uptick.
“The other reason is we’ve seen a real burst of job growth through the turn of this year… that’s generating a lot of income and really providing a lot of backbone to this pickup in spending,” he added.
Another factor that may have influenced the December retails sales figures was the federal GST tax holiday, implemented by the federal government midway through the month, but Guatieri said Friday’s data suggests its impact was minimal.
“The strength in spending was so broad based, it really cut across all categories, even a lot of categories not really covered by the GST holiday,” he explained.
“So, just the broad-based nature of the sales pickup right across the country really suggests that the GST holiday helped a little bit, but probably wasn’t the main driver though… the main drivers here were lower interest rates and strong job growth.”
With files from The Canadian Press
