Strong auto sales hide slowing Canadian disretionary spending

<figure data-media-><img src="https://images.forexlive.com/images/Canada_id_b3852c83-892b-47a3-b4c9-dd280cdff85f_size900.jpg" width="860" height="607" wrapper-="wrapper-" data-src="https://images.forexlive.com/images/Canada_id_b3852c83-892b-47a3-b4c9-dd280cdff85f_size900.jpg" /><figcaption><div>Canada retail sales</div></figcaption></figure><p>Friday's <a href="https://www.forexlive.com/news/canada-retail-sales-for-september-06-vs-00-estimate-20231124/" target="_blank" rel="follow">Canadian retail sales report</a> for September far-surpassed expectations at +0.6% compared to a flat reading expected. In addition, the advance reading for October was +0.8% in a sign of even-more strength.</p><p>CIBC highlights a contrast in consumer spending patterns in the report. While auto sales surged, there was a noticeable dip in discretionary spending in areas like clothing, sporting goods, and furniture. The latter could reflect the ongoing correction in house prices and a slowdown in home sales.</p><p>"The September print suggests that overall GDP in that month will have looked slightly better
than the advance estimate, at 0.1% m/m," CIBC writes. "And while the underlying core group of sales continues to suggest a wilting
consumer, solid auto sales may prevent another drop in goods consumption in the final quarter."</p><p>CIBC also notes that the October print could have been impacted by auto sales, which surged in part due to a delay in deliveries following a port strike.<br></p><p>Looking ahead, the risk here is that strong car sales hide a broader weakening of the consumer and delay Bank of Canada rate cuts beyond what's prudent. Ultimately, that could kneecap the spring housing market and lead to a deeper downturn.<br></p>

This article was written by Adam Button at www.forexlive.com.

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