The Conference Board of Canada’s Senior Economist Richard Forbes offers the following insights on today's release of retail trade data:
“Today’s Statistics Canada release showed that retail sales rose 0.4 per cent in October and are up 4.5 per cent compared to their pre-pandemic level. Strong gains in household income—due largely to government stimulus throughout much of the year—and rock bottom interest rates have allowed retail sales to post a speedy recovery compared to most other sectors of the Canadian economy. This is particularly evident among big-ticket, durable goods such as motor vehicles and furniture. Still, October’s results mark a significant deceleration compared to the previous month, in line with our expectation that the Canadian economy’s recovery has slowed over the last few months of 2020.”
- Retail sales rose 0.4 per cent in October compared to the previous month. That marks a deceleration from September, when sales rose 1.9 per cent.
- Sales rose in six of 11 subsectors. In terms of magnitude, the largest gains were found at motor vehicle and parts dealers, which account for just over one quarter of all retail sales.
- After record declines during the lockdown in April, sales at furniture stores continued to surge. Strong gains in household income—due largely to the government stimulus during the pandemic—and historically low interest rates have encouraged consumers to purchase big ticket items such as autos and furniture despite the continued uncertainty surrounding the crisis.
- Sales at gas stations fell 2.7 per cent and remain about 17 per cent below their pre-pandemic level—much lower than any other subsector. With 2.5 million Canadians who do not usually work from home doing so, and continued weakness in oil prices, gasoline sales have struggled to gain traction since the spring.
- Sales at clothing stores fell 2.1 per cent in October. Outside of gas stations, that is the only retail segment that has not fully recovered from the steep declines seen earlier this year. With work from home orders and a limitation on social gatherings, demand for discretionary new clothing has continued to lag in recovery.
- After taking into account price changes, total sales volumes rose 0.2 per cent in October.
- Sales rose in seven of 10 provinces, with British Columbia and Manitoba posting the largest gains.
- In Ontario, sales fell for the first time since April. The results are hardly surprising considering that the province implemented stricter public health measures earlier in the month.
- Preliminary numbers released by Statistics Canada this morning suggest retail sales were flat in November.
- This morning’s release supports our view that the Canadian economy’s recovery has likely slowed during the final quarter of 2020. Stricter public health measures around the country, combined with the phasing out of the CERB in October are the main causes for the deceleration.
- Looking ahead, we expect economic growth will remain subdued over the first half of 2021 before picking up sharply in the second half of next year. However, our forecast is contingent on widespread availability of a COVID-19 vaccine by next fall. While this is the most likely scenario given recent news from the federal government, there are significant risks of delays should there be difficulties obtaining or distributing the vaccine.