Economy in Brief

Canadian retail sales and other growth metrics appear to be weakening as the year draws to a close. Inflation has firmed up as well. Retail sales in October saw a month-to-month drop of 0.2% as supermarket sales fell 0.7%, month-to-month, clothing store sales fell 1.2%, and retail excluding motor vehicle sales fell by 0.6%. Overall real retail sales fell by 0.6% in October from September. This is the second consecutive month in which total nominal retail sales and retail sales in real terms both dropped month-to-month. Total retail sales and real retail sales both are declining over three months. Total retail sales at a -0.6% annual rate real retail sales-3.2% annual rate. Real retail sales are decelerating from a 2% growth rate over 12 months to a -1.7% annual rate over six months to a - 0.6% annual rate over three months. Real retail sales show more severe deceleration, growing by merely 0.1% over 12-months shrinking at a 3.8% annual rate over six-months and declining at a 3.2% annual rate over three-months.

Other indicators weaken Over three months housing starts show a sharp contraction, falling at a 60.6% annual rate, a clear ongoing deceleration from a -5.2% drop over 12-months. However other metrics show slightly more upbeat results: employment, for example, yields job growth still at 1.2% at an annual rate over three-months although it slowed from a 1.4% year-over-year gain. The all-encompassing leading economic index shows an actual step up to a pace of 2.9% over 3 months from 2.6% over 6-months and 1.9% over 12-months. Manufacturing and mining output also show gains and a sharp acceleration from their year ago pace; for manufacturing output fell 1.4% year-over-year then rose at a 12.1% annual rate over the three-months ended in September; mining and oil production speeded up from a 4.7 percent 12-month gain to an 8.1% annual rate over three-months. The manufacturing and mining statistics lag by one-month. Another positive sign for the economy is unemployment as the number of unemployed declines at a 0.7% annual rate over three months even though it rises by 5.5% over 12 months.

Ranking metrics We can also vet these various sector results by looking at the growth rates year over year and comparing that pace to what has happened historically back to 2014. These individual category ranking statistics provide better relative comparisons across components. On that basis, the weak sector is retailing with real retail sales having 11.3 percentile standing and overall nominal retail sales having a 22.5 percentile standing. The next lowest year-over-year ranking is from manufacturing at a 22.7 percentile standing, that compares to a 26.1 percentile standing for housing starts. The performance of employment fares relatively better at a 38.7 percentile standing, but that's still below the 50% mark, putting job growth below its median for the period. The number unemployed, however, has a 67.6 percentile standing which is above its median and, of course, not a good result because here we would prefer to see leaner numbers on unemployment changes. The year-over-year growth rate for unemployment is solid, in the top one-third of all of the growth rates of the employed that we've seen since January of 2014. For unemployment, at least the sequential growth rates show that the process of unemployment creation is not accelerating. On the positive side the leading economic index has a 78.9 percentile standing which is quite strong and the mining and oil production have a 61.7 percentile standing which is above their median for the period.

Further context? And, when we consider the ranking of these growth rates, we can also look at the progression of growth in the table, such as the mention I made above for unemployment. For example, housing starts have a weak year-over-year standing but they have a much weaker growth rate over three months Compared to 12-months…on the other hand, manufacturing has a weak year-over-year standing but over three months manufacturing output has stepped up growth considerably. No one statistic can create a profile of these industries which live in the real world and have multiple dimensions and where the trends may be dynamic, in flux, and hard to singularly characterize.

Got inflation? As of October, Canadian inflation had picked up to some extent, inflation in Canada had dipped below the 2% mark from April through August of 2025. In September and October, the year-over-year growth of headline inflation was in the 2.3 to 2.2% region. The CPIx which didn't get quite that low, that recently got down to 1.5% and 1.6% in late 2024 and was as low as 2.2% and 2.5% from March to May of 2025 has moved up. September and October price growth rate is up to the 2.8 to 2.9% pace with the core rate running in the neighborhood of 2.6% toward the end of the year after reaching a low just below 2% in November of last year.

Nothing dramatic but a tilt to more of what Canada wants less of Oh no there's nothing dramatic going on in Canada, the economy appears to be weakening to some extent, the retail sales numbers show the largest deceleration. Of course, Canada and the US continue to have a spat over tariffs, and their two leaders still appear to be somewhat antagonistic about how that process is unfolding. Some Canadian stores have even taken the action of removing form the shelves some goods from the US, particularly US alcoholic products. The step up of inflation is something to watch and does not pair well with the weakening in economic activity.

The new UK Confederation of British Industry (CBI) survey on the distributive trades sector shows a sharp weakening of an already weak survey for December and for the outlook into January of 2026.

The month-to-month deterioration from November was widespread across metrics for retailing as well as for wholesaling for the current month as well as for the outlook. The monthly degradation is without exception across the board - omitting the inventory metric which is a different animal in any event since inventory building is sometimes involuntary.

The Retail survey Current conditions: In December, the retail survey for sales compared to a year ago, orders compared to year ago, and sales for the time of year (a seasonal adjustment metric), all worsened month-to-month. The November readings were weak and in December sales compared to a year-ago worsened by 12 points, Orders compared to a year ago worsened by 17 points month-to-month and sales for the time of year worsened by 11 points. These metrics for December are below their respective 12-month average by 6 to 13 points, as well for these categories. The rankings tell a stark story, year-on-year sales have been lower only 5.3% of the time, Year-on-year orders have been weaker only 5.6% of the time, while time of the year sales have been lower only 13% of the time. These are all extremely low-ranking metrics.

Expected Conditions: In January expected conditions have weakened month-to-month by amounts ranging from 33 points to 16 points depending on the metric. And sales and orders compared to a year ago as well as sales for the time of year each are weaker than their respective 12-month average readings by amounts ranging from 4 points to 23 points. The rankings on expectations are even worse than for the current metrics. Expected sales compared to a year ago rank lower less than 1% of the time, the same is true of orders. While sales for the time of year have been weaker 7.7 percent of the time.

Wholesale survey The rankings for wholesaling are even lower than for retailing across the current and expected metrics. The month-to-month degradation for the current readings ranges from 7 points to 17 points weaker while the reading degradation monthly ranges from 5 points to 16 points. Wholesale sales and orders compared to a year ago and sales for the time of year each rank below the 5% mark. The expectations for January shows expectations for the three categories each are at a 2.5 percentile standing or lower.

Summing up The distributive trades survey has all but crashed and burned in December. Over the last 26 years the average of the three current metrics’ rankings has been lower only 18 times. The average outlook ranking for the month ahead has been weaker only 5 times in the last 26 years (over 313 months). On a relative basis the expected sales/orders performance is more depressed than the Current results for January. The pooled rankings show current ranking over the past 26-years weaker only 5.8 percent of the time with expectations lower only 1.6 percent of the time. These are very weak metrics. It is surprising that the BOE is walking on eggshells to cut rates with mixed support for rate cuts amid such weakness. There is already a GDP decline in the monthly data for October. UK and inflation is still too high, but it is breaking lower at a relatively fast pace. Will the UK be the first economy down after Covid?

Belgian consumer confidence has been on the rise since early this year, however, in December the index has taken a step backwards with a reading of -1 compared to a November reading of +2 and then an October reading of zero. The confidence indicator, on data back to 1991 has a ranking in its 78.5 percentile, marking it as a reasonably strong reading on confidence compared to its values over that period. On the whole the trend is still solid, the month’s step-back is small.

The Economic Situation Economic situation for the next 12 months is weaker in December on a reading of -28 compared to -26 in November. The assessment of the previous 12-months is weaker in December at -42 compared to a reading of -38 in November. The outlook is weaker and the recent legacy is assessed as being slightly weaker as well, than it was in November. The assessment of the economic situation for the next 12 months is weak at a 9.7 percentile standing and the assessment of the previous 12 months is also weak at a 23.4 percentile standing.

Price Trends Price trends are seen as higher over the next 12-months at a reading of 38 compared to 27 in November. The backward-looking assessment of price trends also has them stronger in December than in November at a reading of 58 compared to 56 in November. Both of these price trend assessments are high with the outlook reading at its 94th percentile and the backward-looking assessment in its 81st percentile. Price expectations hit their low mid 2023-late 2023 and have been on the rise steadily ever since. The price metric of ‘12-months ahead’ was at zero in April of 2024 but climbed to +19 by February 2025 and currently sits at a level of 38. Price expectations are well in gear to the upside in Belgium despite relative price stability in the Euro-Area.

Unemployment Concerns about unemployment elevated slightly in December to -9 from -10 in November but these are significant readings compared to, say, the 12-month-ago reading which is at a level of +32. The sense of backtracking here is extremely weak. The sense of progress on the part of survey respondents becoming more confident about the future is clearly the prevalent feature here. The December reading for unemployment in fact has only a 2.5 percentile standing, indicating extremely weak concerns about the prospects of unemployment ahead despite the minor month-to-month step-back.

Major Household purchase environment The environment for making major household purchases deteriorates slightly in December at -15 compared to -13 in November. This only puts the index back to where it was in October. The response to the question, ‘is it favorable to buy at present’ is unchanged from its November value at -19 and it has been stuck there for three months in a row. The outlook to make major household purchases in the next 12-months logs a weaker reading at -15 than its 12-month value of -13but is stronger than its 12-month level of -18. The reading for the ‘favorable to buy at present’ question, however, is weaker at a -19 compared to -14, logged 12-months ago. The environment for making a household purchase over the next 12-months has a 55.6 percentile ranking which is above its median, however, the assessment of ‘favorable to buy at present’ has only a 20th percentile standing significantly below its median reading (median readings occur at a ranking of 50%)..

The Financial situation The financial situation for the next 12-months is assessed weaker at -3 in December, compared to zero in November; it compares to a - 2 in October. The assessment 12-months ago was also -2 so this is a very minor deterioration comparing the financial situation of households with the last 12-months produces another deterioration at -8 in December compared to -6 in November and that compares to 12-months ago at -5 another deterioration. However, the backward-looking assessment has a 52-percentile standing which is above its median while the outlook reading of -3 has a 23-percentile standing which puts it in the lower quarter of all expectations on data back to 1991. The current situation is appraised at 20 a step-back from November and October levels as well as from 12-months ago. But the current appraisal also has a queue standing in its 65.7 percentile which has a comfortable margin above its median reading. Households clearly have concerns about their financial situation even though their outlook for making household purchases is above median and their concerns about unemployment are low. Currently, conditions appear to be construed as solid.

Savings Household savings over the next 12-months are weaker in December at a reading of 20 compared to 26 in November; they are closer to their 12-month ago reading of 21. December is still a relatively high reading, in any event, with a 91-percentile standing. The question, ‘is it favorable to save at present’ is unchanged in November compared to December at a reading of -28 although it is weaker than it was 12-months ago and the percentile standing at its 78th percentile, again, a firm reading for this metric.

Summing up - assessment The consumer confidence reading from the Belgian National Bank this month shows a slight set back month-to-month, however, there is a significant an improvement that has been underway that is quite clear from the chart. The concerns that consumers have seemed to be about their financial situation haven't translated into concerns about unemployment or their willingness to make major household purchases, with unemployment concerns very low and their willingness to make household purchases for the period ahead at essentially normal levels. Still, there is more concern about inflation that is percolating, which is interesting considering that overall inflation has been relatively stable and muted in the European monetary area.