Retailers foresee holiday joy even as Poloz looks to hold line on rates: Don Pittis

South of the border, there was much hand-wringing that a shortened holiday spending season this year just wouldn't give our American cousins enough time to shop till they drop.

According to some retail analysts, a late Thanksgiving meant a late Black Friday, viewed as the starting gun for the U.S. Christmas spending frenzy.

Of course, Canadians celebrate Thanksgiving a month earlier and don't quite have that same special Friday to shop, shop,shop.But there is reason to think the season of retail therapythat is also a phenomenon here will give Bank of Canada governor Stephen Poloz one less reason to cut interest rates.

Most analysts expect Poloz to hold rates steady at 1.75 per cent tomorrow, and sturdy consumer spending is part of the rationale.

In a spending mood

Figures released last weekshowthat despite an overall decline to 1.3 per cent in Canadian GDP,housing, consumer activity, construction and business investment were allholding up well.

Exports were down, but that could be partly blamedon a leakypipeline that interrupted oil shipments and a General Motorsstrike that reduced the need for Canadian parts.

Final holiday retail figures don'tcome out till the new year, but there are several signs Canadians remain in a spending mood. And that's despite RetailCouncil of Canada research that shows 18 per cent of Canadians plan to spend lessthan they have in the past.

Clearly, what you say to someone taking a survey doesn't always pan out.

Figures from last year showmore than one-quarter (27%) of those surveyedended up spending more in 2018than they had planned. Only six per cent spent less.

Overall spending is expected to rise substantially in 2019, says the council's Michael LeBlanc.

According toStatistics Canada, consumer spending picked up in the three-month period ending in October. We can't be certain that consumer optimism will continue, but a long run of job creation and growing wages seem to point in that direction.

Certainly, analysis from Adobe Analyticsshows that fears of a short U.S. shopping season seems to haveonly increasedappetite for a consumption binge, as shoppers spent record amounts online.

In the U.S.tooconsumer spending has been one of the mainstays of the economy, even as trade and business investment weakened.

While frigid weather and stormscan drive people away from the shops, a layer of snowlike what landed on parts of the countrythis weekseems to stimulate the holiday shopping impulse.

Keeping the economy afloat

A spendy holiday season isimportant to retailers, those who invest in them, and to people who worry whether consumers can keep the economy afloat for a few more months as we wait for what some foresee as an economic revival. Arule of thumb says that one-quarter of overall retail sales duringthe entire year come in the days before Christmas as people splurge on themselves and others.

There are signs that so long as housing remainson the rise and consumers keep spending,Poloz will be in no mood to cut Canada's interest rates. As he and his deputy, Carolyn Wilkins, have warned in the past, lower ratesthat make borrowing cheaper may not be good for Canadians,who, as a group,have already borrowed too much.

If the next round of stimulus must come from fiscal spending, as the OECD has suggested, Poloz may decide to delay rate cuts well into the new year to see what impact government spending will have. (Thursday's speech from the throne may give a better idea of fiscal spending to come.)

Some economists have said that if Friday's unemployment numbers show us that the recent trend toward more jobs and fewer jobless is interrupted, itmay be the first sign that the Canadian economy really does needa rate cut. So far, retail bank economists have offered wildly different predictions on whether the economy will gain or lose employment this time around.

And in theway that economies are recognized as self-reinforcing, expectations of a bumper holiday retail season will help contribute to economic strengthparticularly as retailers shake the branches for extra staff in an economy where workers are, so far, still in short supply.

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