By Ed Strapagiel

Total retail sales in Canada increased 7.1% year-over-year in September 2014 on a not seasonally adjusted basis, according to the latest numbers from Statistics Canada. This is the highest single month gain in the last 2½ years.

For Q3 2014 overall, total retail gained 5.4% versus a year ago, also a 2½ year high. The 3-month trend (orange line in the chart above) continues to run above the underlying 12-month trend (green line). In fact, the 12-month trend has been more or less steadily improving since early last year.

These results were buoyed up by a huge sales increase for new car dealers in September. The Food & Drug and the Store Merchandise sectors however also increased sales compared to their previous 2014 year-to-date averages.

In the historical note department, September 2014 was the first time that Canadian retail sales eclipsed the $500 billion mark in any 12 month period.

There are a number of positives for the holiday shopping season.
- Recent strong sales increases in the critical Store Merchandise sector indicate good momentum going forward.
- A weaker Canadian dollar should help keep more holiday spending at home.
- Significantly lower gas prices will leave more money in consumers' pockets for holiday spending.
- Canada's unemployment rate fell to 6.5% on October, the lowest level in 6 years.

Each of these may not be a big deal on its own, but their combination could be powerful. Even so, this may not stop many retailers from blowing their brains out with discounts and promotions which they had already planned on.

Food & Drug Stores

Retail sales at supermarkets and other grocery stores continued their up and down pattern with a year-over-year gain of 1.6% in September. For Q3 2014 overall however, sales increased only 0.4% from the same quarter a year ago.

Other store types in this sector did better. Sales at health & personal care stores in Q3 were up 6.5% versus last year, while convenience stores gained 6.0%.

Despite the choppiness, the Food & Drug sector seems to be slowly improving. The underlying 12 month trend (green line in the above chart) now stands at a gain of 2.8%. While this is quite modest, the rate is double what it was 12 months ago.

Store Merchandise

Retail sales for the Store Merchandise sector were up 5.2% in Q3 2014 versus a year ago. This is the highest quarterly gain since Q1 2010. The 3 month trend (orange line in the chart) continues to track well ahead of the 12 month trend. In fact, the underlying trend is now at the highest it's been since November 2008, before the Great Recession.

A number of store types brought in significant Q3 sales increases, including other general merchandise stores up 8.3%, furniture stores up 8.2%, home furnishings stores up 6.9%, sporting goods, hobby, book & music stores up 6.3%, and clothing stores up 5.3%. Only miscellaneous store retailers showed a year-over-year sales decline for Q3 2014, down 0.4%.

Overall, Store Merchandise is in good shape, and it's the retail sector that gets the most lift from holiday shopping.

Automotive & Related

Sales trends appear to be flattening in the Automotive & Related sector, although it's a tale of two forces, namely, new car dealers versus gasoline stations.

In September 2014, new car dealers' retail sales were up an astounding 17.1% from the same month a year ago, and up 11.7% for Q3 overall. This is easily the highest sales growth in all of Canadian retail.

Gasoline station sales however are moderating rapidly as pump prices fall. While gas stations' retail sales were still up 2.9% in September, this is well off the 10%+ pace recorded in the first half of 2014.