Canada’s December retail sales drop amid COVID restrictions Reuters

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© Reuters. FILE PHOTO: A shopper leaves a store at Sherway Gardens Shopping Centre with a multi- shopping bags. REUTERS/Alex Filipe/File Photo

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David Younggren

OTTAWA (Reuters) – Canada’s retail sales are likely to fall 2.1% in December as authorities impose restrictions to combat the Omicron variant of the coronavirus and retailers face challenges, Statistics Canada forecast on Friday.

Statscan also said retail sales rose 0.7% in November, below analysts’ forecast of 1.2%.

Preliminary estimates for December are based on responses from 50.6% of companies surveyed. The average recovery rate was 90.0%.

Statscan also said some shoppers decided to delay purchases until November to avoid shortages caused by local supply chain issues.

Andrew Grantham, senior economist at CIBC Capital Markets, said the decline in December was a bit bigger than he expected.

“Brick-and-mortar retailers will likely continue to struggle in January due to Omicron-related restrictions and staff shortages,” he said in a note.

He said that weakness could be “slightly skewed” to persuade the Bank of Canada to hold steady when it announces rates on Jan. 26. Money markets are pricing in about a 70% chance that the central bank will raise interest rates. The overnight rate is down from a current record low of 0.25%. {BOCWATCH]

The bank has previously said it could raise rates as early as April.

Given Omicron’s rapid popularity that month, December sales were likely to fall by more than 2.1%, said Stephen Brown, senior Canada economist at Capital Economics.

Higher sales at gas stations, building materials and gardening equipment and supplies dealers boosted November’s gains.

Six of the 11 sub-sectors saw sales growth, accounting for 63.8% of retail trade. In volume terms, retail sales edged up 0.2%.

The Canadian dollar was down 0.1% at 1.2520, or 79.87 cents.

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