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Retail Remains Well Positioned as Consumers
Defer Spending in the Wake of GST Tax Holiday
Heading for another strong quarter. While retail sales accelerated and registered a 1.6 per cent year-over-year gain, monthly spending was unchanged in November. After accounting for inflation, sales volumes fell 0.4 per cent. This pullback in spending does not reflect underlying weakness, however. Rather, it shows that consumers are delaying purchases ahead of the GST holiday, which runs from mid-December to mid-February. For example, food and beverage sales – which are included in the tax exemption – led November’s weakness, likely reflecting households pushing back Christmas food and drink purchases. November’s drop also seems to have more than reversed in December. Preliminary estimates suggest that sales volumes jumped by more than 1.0 per cent, translating into a 5.0 per cent surge for the fourth quarter. While on the surface November’s sales figures looked worrying, it appears lower interest rates are beginning to fuel a recovery in household consumption.