Canadian retail sales rose for the fourth straight month, the longest growth streak since early 2022, signalling the Bank of Canada’s interest-rate cuts are boosting consumer spending.

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An advanced estimate suggests receipts for retailers jumped 0.7 per cent in October, the strongest pace since July, following a 0.4 per cent gain in September, Statistics Canada said Friday.

With September’s increase, which matched expectations in a Bloomberg survey, third-quarter retail sales were up 0.9 per cent. That’s compared with the first half of the year, which posted the largest contraction since 2009 outside the pandemic.

The Bank of Canada ramped up its pace of interest rate cuts in October with a 50 basis-point reduction to strengthen economic activities. Although last month’s inflation re-acceleration lowers the odds of another jumbo cut in December, policymakers are expected to continue cutting gradually to make borrowing costs less restrictive.

Prime Minister Justin Trudeau’s government on Thursday announced plans to waive federal goods and services taxes (GST) from items including prepared foods, some alcohol, books and toys over the winter holidays, as well as hand out a one-time check of $250 to nearly 19 million Canadians in the spring. The stimulus package is expected to further fuel consumption in the fourth quarter and into next year.

In September, sales were up in six of nine sub-sectors, led by increases at food and beverage retailers as well as building material and garden suppliers. The largest decrease was recorded at gas stations, which posted a fifth straight monthly drop. That was driven by lower gas prices that month, as volumes increased 3.2 per cent in the sector. Sales at car dealers were also down.

Core retail sales, which exclude gas stations and car dealers, surged 1.4 per cent. In volume terms, receipts increased 0.8 per cent. Excluding autos, sales were up 0.9 per cent, which beat economist expectations of 0.4 per cent and is the fastest growth rate since April.

“This is early evidence that lower interest rates are supporting spending, but per-capita retail sales volumes are still sitting 1.8 per cent below year-ago levels as of September, showing that there is ample lost ground to make up,” Katherine Judge, economist at Canadian Imperial Bank of Commerce, said in a report to investors.

“The upcoming GST holiday will provide a boost for retail sales in December but it could dent activity in November as consumers delay purchases.”

The question is how much of the increase due to the GST holiday will be just spending that is brought forward, leading to weakness later, Charles St-Arnaud, chief economist at Alberta Central, said in an email. Per-capita spending improved on a monthly basis in September, he noted.

“For the Bank of Canada, signs that consumer spending is improving, especially on a per-capita basis, will be welcomed,” he said. “Once we add the further support coming from the temporary GST cut, it seems more likely that the Bank of Canada will cut by 25 basis points in December than by 50 basis points.”

Regionally, sales were up in five of 10 provinces, with Alberta seeing the largest increase of 2.3 per cent, led by higher receipts at car dealers.

The statistics agency didn’t provide details on the October estimate, which was based on responses from 58.9 per cent of companies surveyed. The average final response rate for the survey over the previous 12 months was 88.9 per cent.

— With assistance from Jay Zhao-Murray.

Bloomberg.com