Statistics Canada is reporting that retail sales slumped in November, as consumers put away their wallets after a fat year of spending.

Overall retail sales in Canada fell 0.6% in November, which was weaker than consensus expectations. “Most of the drop was due to a 2.7% setback in autos, the biggest monthly decline in over a year,” says BMO Nesbitt Burns. “However, more recent data for December indicate that this trend has since reversed. Excluding the auto sector, sales were also a bit soft, edging up just 0.1% in the month.”

The weaker sectors in November included sales of clothing, food, and general merchandise, but furniture sales stayed strong. “Canadian consumers decided in November that their driveways and closets may be full, but there was still room in their new house for more furniture,” says Nesbitt.

“This morning’s data were messy, they nonetheless leave Canada’s retail sector on track for only a modest gain in the final quarter of the year,” calculates TD Bank. “On balance, and even accounting for a healthy pace of retail activity during the holiday season, this morning’s data are consistent with growth in real consumer spending of less than 3% in the final three months of the year, which should leave GDP growth for the fourth quarter running at about 2.5% — certainly not enough to ring the inflation alarms.”

“With real retail sales slipping by more than 1% in November, the outlook for monthly GDP has turned very cloudy. On top of an earlier-reported decline in manufacturing, and only modest growth in real wholesale sales, November GDP will be hard pressed to show any growth,” comments CIBC World Markets. “At a minimum, we’re in store for a notable deceleration from the prior month’s solid 0.3% gain, leaving overall Q4 GDP growth below the 3% threshold that denotes the economy’s non-inflationary potential.”

Nesbitt says that, combined with yesterday’s report of a decline in manufacturing shipments, it now looks like November GDP will be flat and growth for all of Q4 will be at the very low end of the 2.5%-to-3.0% band. Still, the drop in retail sales does not look to be the start of a trend. Job growth remains strong and interest-sensitive sectors remain well-supported by still-low borrowing costs.”

“While today’s data confirm that consumers were in a cautious spending mode in advance of the all-important holiday spending season, any concerns that consumer spending will collapse on this side of the border are completely misplaced,” says TD. “The Canadian economy is coming off its strongest job-market performance since the late 1980s economic boom, and personal income growth has been running at a respectable, if not breathtaking clip. Moreover, in contrast to the United States, consumer confidence is running at elevated levels. As a result, there is every reason to expect Canadian consumers to have ramped up their spending in December – although heavy price discounting in some sectors, most notably clothing, may have put a damper on the value of sales during the holiday shopping season.”

CIBC says that a period of slower growth ahead should soften the Bank of Canada’s hawkish stance, and obviate the need for near-term tightening.