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In December 2022, retail sales expanded by 0.5%. However, in volume terms which is a better measure of economic activity, retail sales increased 1.3%. The Consumer Price Index (CPI) rose 6.3% on a year-over-year basis in December, suggesting that consumers shrugged off the reduction in their purchasing power and continued to open their wallets heading into the holiday season.

Core retail sales, which excludes sales at gasoline stations and motor vehicle and parts dealers, increased by 0.4% in December after falling in November. The rise in core retail was driven mostly by higher sales at general merchandise stores (up 1.7%), which saw its third consecutive monthly increase many customers were looking for retail alternatives to grocery stores for their food and beverage purchases.

The increase in core retail sales was further boosted by higher food and beverage sales (up 0.5%). Supermarket and other grocery (apart from convenience) store sales increased 0.6%, and those at beer, wine, and liquor stores were up 1.3%. The increase in retail sales at supermarket and other grocery stores were primarily driven by a rise in food prices. Prices for food purchased from supermarkets increased 11.0% on an annual basis in December.

Building materials and garden equipment and supplies stores saw the biggest decline in sales in December (down 3.8%). Sales at building materials and garden equipment and supplies stores decreased for the fourth consecutive month in December in response to the slowdown in Canada’s housing market.

While core retail sales were up slightly in December, sales at dealers in motor vehicles and components were up 3.8%, marking the fifth straight month of growth. Sales at new automobile dealers (up 5.0%), which saw their biggest increase since February 2021, were the main driver of the growth in the industry. Increased sales at used vehicle dealers (up 2.1%) and auto-parts, accessory, and tire retailers (up 1.0%) also contributed to the increase observed in December.

Gasoline stations posted the largest decline in retail trade in December, with sales down 5.8% month-over-month.The decline in sales at gasoline stations was almost exclusively driven by the decline in prices as sales rose 4.7% in volume terms. The biggest monthly drop in gasoline prices since April 2020 occurred in December of last year, with prices plummeting 13.1% on a seasonally unadjusted basis. Concerns about a slowing global economy and decreased demand due to rising COVID-19 cases in China led to lower crude oil prices. Overall, in 2022, sales at gasoline stations and general merchandise stores were the main drivers of the 8.2% year-over year growth in retail sales observed last year

In December, retail sales rose in four provinces, with Ontario (+0.9%). Quebec also saw an increase of1.1% in December driven?by the 1.7% increase in sales observed in the Montréal census metropolitan area (CMA). British Columbia saw the highest provincial decline in retail sales (down 1.1%), mostly driven by the drop in sales at gasoline stations.

Retail e-commerce sales were down 5.7% month-over-month in December on a seasonally adjusted basis. Year-over-year retail e-commerce sales fell 2.4% compared to December 2021. The proportion of e-commerce sales to all retail sales decreased by 0.6 percentage points.

Statistics Canada’s preliminary reading shows that retail sales will rise by 0.7% in January, building on the momentum from December. However, those gains are expected to be short lived with a moderate outlook for retail spending ahead this year as consumers continue to contend with high inflation and reduced purchasing power.