Economic Quick Take

Courtesy of the Conference Board of Canada. The latest Economic Quick Take is available now

Here are highlights and key insights into Statistics Canada’s January 21 retail sales release:
  • Retail sales rose by 0.7 per cent month-over-month (m/m) in November, after posting a 1.6 per cent expansion in October. In volume terms, sales increased by 0.2 per cent.
  • Statistics Canada’s flash estimate for December suggests that sales decreased by 2.1 per cent. However, this preliminary estimate is based on responses from half of the surveyed companies, so this figure will likely change.
  • Retail sales were up in seven provinces. Quebec posted the largest increase, rising 1.2 per cent, while Ontario (+0.5 per cent) grew more moderately. Meanwhile, sales in British Columbia experienced a 0.8 per cent expansion despite severe flooding in November.
  • Sales at gasoline stations rose by 4.9 per cent in November, much higher than October’s 0.2 per cent increase. Meanwhile, sales at motor vehicle and parts dealers declined by 0.3 per cent.
  • Core sales (excluding gasoline and motor vehicles) increased by 0.5 per cent. Building material and garden equipment and supplies dealers (+3 per cent) witnessed one of the largest increases, while sporting goods, hobby, book and music stores (-10 per cent) posted a significant decline.

Key insights

  • The Omicron variant swept through the country before the holidays, with most provinces seeing record high cases and hospitalizations. This forced many provinces to impose stricter restrictions, with the common denominator being limited customer capacity for retailers. On top of that, steadily rising prices, waning household savings, and lingering supply chain disruptions are also taking their toll on the retail industry.
  • Following our latest forecast, we expect retail sales to decline over the next two quarters, as pandemic related issues linger in many sectors of the economy. Retail sales will then expand moderately during the second half of the year. While we are still optimistic about the future, new waves of the virus could deter our outlook despite Canada’s high vaccination rate. As we’ve learned with Omicron, widespread lockdowns are not entirely a thing of the past.
  • But will the supply crunch end soon, you ask? While sales in constant dollars indicate a slightly higher volume of goods sold in November (pointing towards a smoother supply chain), the recent vaccine mandate imposed by the Federal government on U.S truck drivers crossing into Canada is likely to exacerbate the supply problem further. As much as 20 per cent of American truck drivers crossing the border could be affected by the new restriction. This comes at the time of the year when Canada is more dependent on U.S exports, especially for fresh food produces that won’t grow during our winter months.
Patricia Dent

Leave a Reply

Your email address will not be published. Required fields are marked *