December retail sales tumble

Canadian retail activity in December tumbled to its biggest drop in over 15 years, Statistics Canada reported Monday.

The one-month drop of 5.4 per cent surpassed the 4.5 per cent sales drop seen in January 1998, when a massive ice storm hit much of Ontario and Quebec.

Economists had expected a December decline of roughly 2.7 per cent.

"Canadian consumers are going into lockdown mode," said BMO Capital Markets economist Douglas Porter.

"While the decline remains a bit less extreme than U.S. trends, there is little debate that Canadian consumers are also battening down the hatches to ride out the economic storm," he said.

Alberta experienced the biggest drop among all provinces and territories, with a decline of 6.2 per cent in December.

In the month, three-quarters of the overall retail decline stemmed from the automotive sector. Excluding the automotive sector, which includes new, used and recreational vehicle and parts dealers as well as gasoline stations, retail sales fell 1.8 per cent.

Statistics Canada said significant monthly decreases were also registered in sectors traditionally associated with holiday shopping.

Sales at clothing and accessories stores sector fell 3.7 per cent for the month. Sales at furniture, home furnishings and electronics stores and miscellaneous retailers, including sporting goods and book stores, declined by more than two per cent.

Economists said the retail sales report for December indicates a weak reading on gross domestic product is in store for the month and for the fourth quarter of 2008.

"In total these reports are indicating a one per cent drop in December GDP, implying a further deterioration relative to declines of 0.7 per cent and 0.1 per cent for November and October, respectively," said Royal Bank assistant chief economist Paul Ferley.

"This suggests a downside risk to our current forecasted growth rate for Q4 of -3.1 per cent. As well, it suggests a much softer growth number than the 2.3 per cent decline projected by the Bank of Canada in its January Monetary Policy Report Update," Ferley said in a commentary.