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 fell 3.4 per cent in December, posting their largest decline since April of last year. With provincial governments implementing more stringent lockdown measures throughout the month, the results are hardly surprising. And given that restrictions have mostly remained in place since December, it is likely that retailers continued to be hit hard by the pandemic during the first two months of 2021.”
- Retail sales fell 3.4 per cent in December compared to the previous month. That marks their largest decline since April of last year.
- Sales fell in nine of 11 subsectors. At 22 per cent, hobby stores posted the largest decline. As well, clothing, furniture, and electronic and appliance stores showed relatively steep declines.
- In contrast, sales at grocery stores fell just 0.2 per cent. With demand for food holding up well over the past year, and grocers largely exempt from in-store shutdowns, grocers were able to avoid a large set back in sales.
- Given that provincial governments began to implement more stringent lockdown measures in December, the results were not surprising. Many retailers across the country were forced to close for in-store shopping, severely hurting their revenue during the month.
- On a positive note, retail sales were still 2.1 per cent above their pre-pandemic level, a testament to government support measures implemented over the past year. With household disposable income posting strong gains during the pandemic, retail sales were able to recover swiftly once lockdown restrictions were lifted in the spring of 2020.
- Taking into account price changes, total sales volumes fell 3.6 per cent in December.
- Sales fell in every province, with Newfoundland and Manitoba posting the largest declines. Meanwhile, Quebec, Saskatchewan, and Alberta had relatively modest contractions of less than one per cent.
- Given the situation, consumers continued their trend of shopping online rather than in-store. As such, retail e-commerce sales increased 1.1 per cent in December and reached a record high.
- Preliminary estimates released by Statistics Canada today suggest that retail sales were down an additional 3.3 per cent in January. That is inline with our view that the Canadian economy’s recovery would be stalled in the first quarter of the year. We expect that real gross domestic product (GDP) will contract and stall over the first half of 2021 but will pick up sharply starting in the third quarter.
- It is important to note that our forecast is contingent on widespread distribution of effective COVID-19 vaccines by the third quarter of this year. While we still believe this is the likeliest scenario, significant delays of the vaccine rollout would understandably slow Canada’s economic recovery.