Canada's retail sales drop in October

Canadian retail sales dropped almost one per cent in October as consumers took advantage of falling prices at the cash register, according to figures released Thursday.

Statistics Canada said Canadians spent $34.9 billion in retail stores in October, down 0.9 per cent from September's figure. Once automotive sector receipts were subtracted, the national statistical agency said retail sales actually dropped by a larger amount, 1.1 per cent.

Plunging prices a plus

Leading the downward charge for overall sales were gasoline stations, beer and liquor stores and furniture floggers.

"The sharpest decline in October was a 2.1 per cent drop in sales by furniture, home furnishings and electronics stores, which posted its third decline in a row. The key contributor was furniture stores, whose 4.5 per cent drop in sales was mainly influenced by a decrease in the price of furniture," Statistics Canada said in a press release.

Retail sales change for OctoberSectorvs. Sept. (%)vs. October '07 (%)Furniture stores -4.5 -1.1Home furnishings -4.0 -0.4Gasoline stations-4.0 16.8Beer & liquor -2.8 1.1 Source: Statistics Canada

In fact, in economic terms, declining prices might be the silver lining in a relative weak October saleswise.

Once sticker declines are eliminated from the October figures, the volume of product moving off of store shelves actually rose, albeit by a barely-discernible 0.1 per cent. That indicator could not match September when sales rose 0.7 per cent in volume terms.

Still, however, at least retailers sold more product in October, a possible indication that consumers were taking advantage of winter sales rather than abandoning the malls altogether.

As an example of the effect of dropping prices, the lower gasoline station figures, down four per cent compared to September, reflected falling world oil prices more than changed driving habits among Canadians.

The U.S. Energy Information Agency predicted that spot prices for West Texas intermediate crude oil, a commonly used reference price, will tumble to an average of $61.64 US a barrel for the fourth quarter of 2008. That represented a drop of 48 per cent compared to $118.05 for the July-September period.

As a result, since July, Canadian gas sales have fallen nearly $400 million to $4.484 billion by October. Overall, gasoline sales were up almost 17 per cent comparing October 2008 with the same month one year earlier.

Year sales still up

Comparing the latest October with the same month one year earlier, total Canadian retail sales were 4.1 per cent higher.

Canada's retailers appear much better off than their American cousins.

U.S. retail sales in November were down 7.4 per cent compared to the eleventh month of 2007.

"Tighter access to credit, along with rapidly rising unemployment and extreme consumer over-leveraging, have already led to the biggest drop in real consumer spending since the early 1980s, and the sector will continue to contract at least until the middle of next year," said Meny Grauman, an economist with CIBC, earlier in December.