Investing.com -- On Friday, Capital Economics released a report indicating that the momentum in consumer spending is showing signs of weakening.
Retail sales volumes were flat in October, ending a streak of consistent monthly increases. The report also highlighted a preliminary estimate that retail sales values remained unchanged in November, hinting at a possible emerging trend rather than an isolated incident.
Despite this, sales did increase in five of nine sub-sectors during October, with high-cost items experiencing robust sales.
The October data showed a 0.6% month-over-month (m/m) increase in retail sales values, attributed solely to higher prices as sales volumes did not change. Motor vehicle sales outperformed other categories, with a 2.0% m/m growth, while furniture retailers and electronics and appliance stores reported sales increases of 2.3% and 4.9% m/m, respectively.
The data suggests that lower interest rates may be stimulating demand for these big-ticket items. On the downside, food and beverage sales saw a significant 0.7% m/m decrease, and gasoline sales volumes dropped by 4.7% m/m. Overall, core retail sales experienced a slight 0.1% m/m rise.
The preliminary figures for November are less encouraging, indicating that retail sales values did not change from the previous month. Considering the overall rise in goods prices in November, it's possible that sales volumes may have actually declined.
However, Capital Economics remains optimistic about the near-term outlook for household consumption, citing the Goods and Services Tax (GST) holiday and the increase in real disposable income as factors that could bolster consumer spending into early 2025.
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