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Canadian Retail Sales Disappoint

The Canadian dollar took a hit following a raft of disappointing economic data. The Loonie is feeling pressure from underwhelming fourth quarter retail data and disappointing fourth quarter U.S. gross domestic product (GDP) numbers fell to a two-week low against the greenback. One Canadian dollar is now worth around USD$0.75. At the end of January, the Canadian dollar was trading near USD$0.75.Canadian retail sales surprised investors after posting their worst performance in nine months in December. The decrease ends four consecutive months of gain in the retail sector and comes at a time of tepid wage gains and record household debt levels.In December, Canadian retail sales fell 0.5% month over month to a seasonally adjusted $44.91 billion. Economists expected Canadian retail sales to remain unchanged from November’s gain of 0.3%.1The decline was broad-based with nine out of 11 sectors posting lower sales. The biggest sales—autos, which account for around 25% of total retail sales—were down by nine percent. Even if you exclude auto sales, overall retail sales were still down 0.3% in December.A pullback in consumer spending results in a decline at health and personal care stores (-4.1%), clothing stores (-3.7%), electronics and appliances (-2.3%), and liquor stores (-3.6%). The only areas to report increases were building materials (0.7%) and sales as gas stations (6.6%).

Fourth-Quarter U.S. GDP Disappoints

The Canadian dollar is also feeling pressure following disappointing fourth-quarter U.S. GDP data. Fourth-quarter GDP advanced 1.9%. Economists expected the U.S. economy to advance 2.1% in the fourth quarter.2The miss comes despite stronger than expected consumer spending. Consumer spending advanced 3.0% in the fourth quarter. It was previously reported to have increased 2.5%. This is an important metric as U.S. consumer spending accounts for more than 70% of GDP. Still, GDP was weighed down by exports, business investment, and state and local government spending.The U.S. economy grew just 1.6% in fiscal 2016, its worst performance since 2011. In 2015, U.S. GDP grew 2.6%. On the campaign trail, Donald Trump promised that, if elected, he would steer the U.S. economy to four percent annual GDP growth.

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  1. “Retail trade, December 2016,” Statistics Canada, February 22, 2017; http://www.statcan.gc.ca/daily-quotidien/170222/dq170222a-eng.htm.
  2. “National Income and Product Accounts Gross Domestic Product: Fourth Quarter and Annual 2016 (Advance Estimate),” Bureau of Economic Analysis, February 28, 2017; https://www.bea.gov/newsreleases/national/gdp/2017/gdp4q16_adv.htm.