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Weak auto, holiday sales rattle retailers, December drop biggest since 2010

File photo of a Toyota dealership in Toronto.

SARAH DEA/The Globe and Mail

Canadian retail sales unexpectedly plunged 2.1 per cent in December amid slumping new-car sales and a weak Christmas shopping season, Statistics Canada data said on Friday.

The drop, far larger than the 0.3-per cent decline predicted by economists, suggested that already moderated expectations for fourth-quarter growth might be too optimistic. The monthly fall was the greatest since a 2.4-per cent decline in April 2010.

Year on year, sales fell 0.7 per cent, the worst since October 2009.

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Seven of 11 subsectors, representing 58 per cent of retail trade, registered declines. Sales by auto and parts dealers dropped by 6.4 per cent, pulled lower by a 7.7 per cent drop in sales at new car dealers.

Most stores associated with holiday shopping recorded weaker sales, with general merchandise store receipts dropping by 3.7 per cent and department store sales falling by 9.6 per cent. Sales at electronics and appliance stores, which jumped in November as Apple rolled out its iPad mini, fell by 12.1 per cent.

Last month, the Bank of Canada trimmed its forecast for fourth-quarter growth to 1.0 per cent from 2.5 per cent. December growth is likely to be disappointing given poor manufacturing, wholesale and now, retail trade.

Statscan is due to release data for both December and fourth-quarter gross domestic product on March 1.

In volume terms, used for calculating real GDP moves, retail sales fell 1.6 per cent.

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