It is also down from the 1.6% growth recorded in October, a sign of a slowdown after the promising surge in spending posted at the start of last fall.
The potential drop in spending is underscored by Statistics Canada’s preliminary estimate for December, which showed retail sales falling 2.1% for the month.
Although the agency warned that its first estimate would be revised, it suggests a difficult economic recovery, as periods of growth could be followed by setbacks.
“While we were expecting weakness in December, the decline appears to be somewhat larger than expected,” Andrew Grantham, senior economist at CIBC Capital Markets, said in a client note.
If preliminary data for manufacturing and wholesaling due out next week also fell short of expectations, it could mean December GDP was weaker than expected, he said.
“Signs of a slowing economy before the worst-case scenario counts and restrictions are hit could also tip the scales slightly in terms of whether the Bank of Canada will hold rates next week and expect signs of recovery before coming back up,” Grantham said.
The spending slowdown — even before the worst of the spike in omicron cases and accompanying restrictions — prompted economists to release muted projections for the months ahead.
The Conference Board of Canada said it expects retail sales to decline over the next two quarters before rising moderately in the second half of the year.
“While we are still optimistic about the future, further waves of the virus could dampen our outlook despite Canada’s high vaccination rate,” the think tank said in its latest Economic Quick Take.
“As we learned with omicron, widespread lockdowns are not entirely a thing of the past.”
Statistics Canada said severe flooding in British Columbia and parts of Atlantic Canada damaged infrastructure and disrupted business activities.
Of the region’s retailers surveyed, 21% said sales had been affected by the floods, mainly due to transport disruptions.
Overall, November’s rise in retail sales was led by a 4.9% increase in sales at gas stations, a 3% increase in sales at building supply stores, hardware stores garden and supply merchants, and a 1% increase in sales at food and beverage stores. .
Core retail sales across Canada — which exclude gas stations and motor vehicle and parts dealerships — rose 0.5%, the agency said.
Among the bright spots in consumer spending were sales of clothing and clothing accessories, which rose 3% in November.
Sales at jewelry, luggage and leather goods stores rose 5.7%.
Sales in November rose in six of 11 subsectors, accounting for nearly 63.8% of retail trade, Statistics Canada said.
Expressed in volume, retail sales rose 0.2% in November.
BMO Capital Markets economist Shelly Kaushik said retail sales posted a decent gain in November, although much of it was due to higher prices as inflation eroded purchasing power .
Meanwhile, December is expected to register an outright decline, she said.
“Stricter restrictions appear to have limited spending in December,” Kaushik said in a client note. “Consumers seem ready and willing to spend, but they can only do so when they are allowed to.”
Looking ahead, Ksenia Bushmeneva of TD Economics said the retail spending picture is mixed.
“Capacity limits, staff absenteeism and health issues may weigh on store sales as the year begins,” she said in a note. “Supply chain bottlenecks are also likely to intensify again, leading to shipping delays, higher prices and less choice for consumers.”
Retailers with online operations could also see sales increase as consumers redirect spending from services to goods, similar to previous lockdown episodes, Bushmeneva said.