Retail sales ended 2012 with a thud

Statistics Canada says retail sales declined 2.1 per cent to $38.6 billion in December, after five consecutive monthly gains.

The agency says weak holiday sales and lower sales of new cars pushed the decline.

Lower sales were reported in seven of 11 subsectors, representing 58 per cent of all retail trade.

Sales at motor vehicle and parts dealers were off 6.4 per cent, with a 7.7 per cent drop in new car sales.

Most store types typically associated with holiday shopping registered weaker sales in December, with general merchandise store receipts off 3.7 per cent.

Retail sales were down in all provinces in December, with Ontario reporting the largest decrease in dollar terms, at 2.4 per cent.

Data a 'disappointment'

"Consumers account for about two-thirds of economic activity so the fact that they pretty well stepped on the brakes in the fourth quarter of last year was a disappointment," Derek Burleton, TD Bank chief economist,told CBC News.

Burleton expects Canadians are heeding the Bank of Canada's warnings to pay down their high debt levels.

"I view it as being a positive overall," he said.

"In the short term it will come at a cost of weaker economic growth and we're already seeing that in the numbers. But from a longer term perspective, I think it's necessary that we see households restrain more."

"We've seen what happens globally if households take on too much debt and something happens, either interest rates rise surprisingly, or the job market weakens, and there's still a vulnerability there."

So I do view this as being a positive development in terms of getting their finances together."