While the BoC's monetary policy has alleviated some inflationary pressures, households are experiencing sustained hardship
The 0.2% decline in Canadian retail sales seen in November points to the sustained impact of elevated interest rates on consumers, according to market observers.
This drop essentially aligned with the Bank of Canada’s rate-tightening strategy, although consumers are experiencing notable strain.
Pedro Antunes, chief economist at the Conference Board of Canada, said that while the central bank’s monetary policy has alleviated some inflationary pressures, households’ perennial hardship in these conditions cannot be understated.
“It’s a continuation of that story of consumers really being hard hit,” Antunes said, adding that on a per capita basis, consumer spending registered marked downturns in October and November – veering towards recessionary levels, he warned.
“We’re in very deep recession territory… There’s a lot of pain here being felt by a lot of households and it’s showing up in these numbers.”
The Bank of Canada is likely to leave its overnight rate unchanged in its first decision of 2024, according to new forward guidance by the Royal Bank of Canada (RBC).
— Canadian Mortgage Professional Magazine (@CMPmagazine) January 19, 2024
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Should these conditions persist, there is a very real chance of “very weak growth overall” for the Canadian economy this year, Antunes said.
At the same time, Statistics Canada’s early estimate for December pegged a 0.8% increase in sales.
“The good news is that most of that pain and that impact has already been felt, and we’re hopeful that we will see the economy starting to pick up in the second half of this year as interest rates come down,” Antunes said.
The Conference Board of Canada is projecting an interest rate cut in late spring or early summer.
