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Canadian consumers rang through more purchases this year over the holidays with analysts estimating a 3- to 4-percent increase in retail sales over last year – a trend that mirrors retail activity south of the border.
Last December, retail sales for the month grew 2.4 percent over the previous year to $23.6 billion, not including the automotive sector, according to Statistics Canada. This year, that growth could be closer to 4 percent.
The bump in the Canadian sector comes as reports show American consumers spent money at the briskest pace in five years this holiday season, possibly the most welcome sign yet that the world’s biggest economy is gathering steam.
Sales at U.S. retailers soared 5.5 percent during the pre-Christmas period, according to MasterCard Advisors’ SpendingPulse, a service that measures retail sales regardless of how they’re paid. That was the best performance since 2005 and compares with a 4.1-percent-gain in the previous year. During the week that ended on Christmas Day alone, chain-store sales in the United States rose almost 5 percent from the same period a year ago, according to a survey released Tuesday by the International Council of Shopping Centers and Goldman Sachs.
In Canada final figures aren't expected to be tallied for a while but analysts are optimistic about the numbers. “We’re expecting this Christmas season to be better than we originally expected,” said Maureen Atkinson, a senior partner at Toronto-based retail consulting firm J.C. Williams Group Ltd. She forecasts an increase in sales of roughly four percent this holiday period compared to last year.
“It’s not a barn-burner year, but it’s certainly a successful year, and sales will be up compared to last year,” said retail analyst John Winter of Toronto-based John Winter Associates, who also forecast 3- to 4-per-cent growth.
Bank of Canada Governor Mark Carney and other policy makers have stressed in recent weeks that the health of the U.S. consumer will be crucial to Canada’s recovery in the months ahead. That’s because exports – 75 percent of which still go to the United States – will be relied on to power growth, as Canadian households and governments work to trim debt loads and spend less.
The U.S. picture isn’t entirely rosy. The New York-based Conference Board said Tuesday that its index of consumer confidence slipped unexpectedly in December, a month in which the U.S. unemployment rate rose for the first time since July, to 9.8 percent.
And another report showed the U.S. housing market is still nowhere near the improvement that analysts have been hoping for, meaning many Americans will take longer than expected to recover the net worth that’s been eroded. The S&P/Case-Shiller index of property values in major U.S. cities fell 0.8 percent in October from a year earlier, marking the steepest year-over-year drop since December of 2009.
However, the broader Thomson Reuters/University of Michigan survey of consumer confidence showed sentiment actually improved to a six-month high in December. It found the number of people who said their current conditions have improved reached the highest level since January of 2008. Economists also cautioned against reading much into the Conference Board’s report since three of five survey questions concern jobs or income.
Economists such as Jill Brown, New York-based vice-president of economics at Credit Suisse, are guardedly optimistic that the United States will stay on an upward path, and that the country’s 2.6-percent annual growth rate in the third quarter could accelerate enough to bring unemployment down. They may be onto something, as much of the last pre-Christmas data indicated the economy is finally gaining traction. Other reports last week showed American households increased their purchases for a fifth consecutive month in November, companies recorded an increase in orders for capital goods such as computers and communications gear, and the number of Americans filing for jobless benefits declined by 3,000, dropping the four-week moving average to the lowest since mid-2008.
Those reports added to optimism that the economy will get a decent jolt, albeit a temporary one, from the surprise deal that President Barack Obama struck with congressional Republicans to cut taxes and extend unemployment benefits.
“Consumers are feeling a little better, and doing a little better,” said Jill Brown, New York-based vice-president of economics at Credit Suisse.
Consumers on this side of the border echoed that sentiment during the holidays. While Canadian retailers are not yet releasing more specific numbers, early indications show there was an improvement across the retail sector.
“Overall, there is a little more consumer confidence this year than there was last year. Absolutely, we’ve seen that in our stores,” said Tom Quinn, president and chief operating officer of sporting goods retailer Forzani Group Ltd., which owns Sport Chek, National Sports, Atmosphere and other stores in Canada.
Sales were better than expected at Best Buy and Future Shop stores in Canada, said Annalisa King, senior vice-president and chief financial officer for Best Buy Canada. More than 50 of Best Buy’s stores across the country rang in $1-million in sales or more on Boxing Day, and on Christmas Eve both chains’ websites counted more online transactions than ever before.
Forzani Group’s Mr. Quinn said the Calgary-based company also saw better results on its Boxing Day sales on merchandise such as discounted Saucony shoes and Nike shirts, compared to last year. The company also had a strong holiday period overall.
“Canadian consumers are not feeling as cautious about the economy as they were last year or the year before, and stores did not have to work as hard to bring shoppers in, said Mr. Winter, the retail analyst.
“This holiday season, there was no panic like there was in previous years with retailers doing disastrously low deals before Christmas.”
With reports from Bloomberg and Dow Jones