U.S. Retail Sales provide a Taste of what is to come in Canada
Statistics Canada's retail sales figures are seriously lagging when it comes to analysing what is happening with the Canadian consumer. The latest numbers are for October. The latest U.S. figures are for November and they give a better taste of what is to come. It appears that we are about to swallow a bitter morsel.

In the Canada versus U.S. comparison charts below, for 3-month moving averages, both total retail sales (-4.5%) and automotive-related sales (-23.1%) south of the border are in decidedly worse shape than north of the border (+4.5% and -3.3% respectively). September was the month that really set the negativity in motion in the United States.

The Auto Markets North and South of the Border
It is interesting to look at Canadian automotive sales figures. The wholesale trade numbers include auto sales to the United States. In October 2008, new motor vehicle sales in dollars, as opposed to units, were -13.8% year over year at the wholesale level.

By way of contrast, retail sales and new motor vehicle sales measure purchases within Canada. According to these figures, Canada's auto sector held up quite well through October. However, this is about to change with the next set of statistics. For example, in its "New Motor Vehicle Sales" report, Statistics Canada observes that all vehicle sales were down by 0.9% year over year in October 2008 and that preliminary figures indicate this year's November number will fall by 7% versus last year's November number.

Furthermore, latest survey results (as reported by the media) indicate a drop in December year-over-year sales of about 20%. That would be more in keeping with what is happening in the U.S., where year-over-year unit sales of automobiles are down by one-quarter. The major negative influence on new car purchases is the declining jobs market.

Important Carry-over Effects — Consider Advertising
Furthermore, while the wholesale and retail trade numbers are important on their own, there are important carry-over effects to also consider. For example, with respect to the pile-up conditions in the auto sector, consider advertising. In most recessions, discretionary advertising is among the first sectors to be hurt. This usually shows up on the print side, with newspapers and magazines going through various stages of crisis.

But in the past, the car companies could usually be counted on to carry on with spending to help prop up general advertising revenues. That does not appear to be the case this time around. Furthermore, one of the major sponsors in the television industry is the auto sector. With the particular weakness of the Detroit Three at this time, television may be about to suffer a similar fate to what newspapers have gone through in the past.

As for the Detroit Three, there is another aspect to the advertising issue. After the tongue- lashing that chief executives received from Congress with respect to the use of corporate jets, there is a reluctance to be seen as too extravagant. This extends to fancy ads, such as the ones that are often rolled out during the Super Bowl. Other companies in these tough economic times are also becoming more sensitive to how they present themselves.

This is one of the unique features of this downturn. It appears to be spreading to more sectors and to be more all-encompassing than many recessions have been historically.