The Canadian Christmas shopping season was surprisingly weak, according to Statistics Canada figures released on Monday, which heightened expectations the Bank of Canada will stand pat on interest rates for some time. December retail sales fell by 1.4 percent, much more than the 0.1 percent fall analysts had expected, and following a drop in November of 0.1 percent. The figures are adjusted for seasonal factors such as Christmas shopping. In raw data December's sales were 17.7 percent higher than those in November.

Bonds rose and the Canadian dollar fell as the market figured the Bank of Canada was even less likely to be raising interest rates soon. The central bank next sets rates on March 1.

"This report will keep the Bank of Canada firmly on the sidelines," BMO Nesbitt Burns chief economist Sherry Cooper said in a statement. The numbers contrasted with December wholesale trade data released on Friday which showed a 1.1 percent gain.

Much of December's drop was due to pronounced declines in sales of new cars - which Statscan said are projected to have fallen a further 1 percent in January - and sales of alcohol. But even excluding autos and parts, December sales were down 1.1 percent.


The November-December data followed six months of uninterrupted sales growth, which helped register a 5.0 percent rise for 2004 as a whole, up from 2003's gain of 3.8 percent. In constant dollars, the increases were 4.1 percent and 3.0 percent respectively.

Copyright Reuters, 2005