Quick take

Retail Sales Start the Year Off Right. Will It Last?

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  • Retail sales increased by 3.2 per cent month-over-month (m/m) in January, after falling by 2.0 per cent in December. In volume terms, sales increased by 2.9 per cent.
  • Statistics Canada’s flash estimate for February suggests that sales decreased by 0.5 per cent. However, this preliminary estimate is based on responses from 37 per cent of the surveyed companies, so this figure will likely change.
  • Retail sales were up in 9 of 10 provinces. Ontario contributed the most to this month’s increase (+3.1 per cent). Meanwhile, Saskatchewan (–0.3 per cent) saw the only decline of all provinces.
  • Sales at gasoline stations were unchanged in January. At the same time, sales at motor vehicle and parts dealers expanded by 5.3 per cent, their fourth consecutive monthly increase.
  • Core sales (excluding gasoline and motor vehicles) increased by 2.9 per cent. Sales increased in 9 of 11 subsectors in January. Furniture stores (+10.0 per cent) and building materials dealers (+8.9 per cent) showed the largest gains, while clothing stores (–3.5 per cent) posted the steepest contraction.

Key Insights:

  • After a difficult end to 2021, retail sales posted a bounce-back in January. However, much of the increase was due to tighter restrictions on high-contact services such as dining out and entertainment, which were in place throughout the month. With fewer options to spend their savings on, consumers redirected their spending to retail goods, a trend we’ve seen throughout the past two years.
  • In addition to restrictions on services, fewer supply bottlenecks were a secondary supporter to the increase in sales. In January, it was likely that fewer retailers were impacted by last autumn’s floods in British Columbia and the Atlantic provinces compared with December. At the same time, pandemic-related supply disruptions, while still very much an issue, have shown some signs of easing. These factors are allowing retailers to stock their shelves with more goods, further contributing to the gain in sales.
  • Our view is that growth in retail sales will slow throughout the remainder of 2022, driven by greater spending on services as the tourism sector gears up for its much-anticipated comeback. Price inflation is also presenting a downside risk for many retailers, something which is getting more concerning given the rise in commodity prices since Russia began invading Ukraine last month. As prices continue to rise, consumers will find themselves spending a greater share of their budgets on essential items such as food and gasoline, becoming less willing to accept higher prices for discretionary retail goods as a result.

Russian Invasion of Ukraine: Access the latest insights

Richard Forbes

Richard Forbes

Senior Economist

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