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 1.3 per cent in November and are up 5.6 per cent compared to their pre-pandemic level. Strong gains in household income—due largely to government stimulus throughout much of 2020—encouraged consumers to spend more ahead of the holiday season.
Although retail sales growth decelerated in the final quarter of 2020, today’s results are encouraging as they signal that consumers were confident enough to increase their spending on discretionary retail goods in November despite a rising number of COVID-19 cases.
- Retail sales rose 1.3 per cent in November compared to the previous month. That marks a significant acceleration from October, when sales rose a meagre 0.1 per cent.
- Sales rose in seven of 11 subsectors. The gains were led by food and beverage stores, which rose 5.9 per cent. Given the resurgence in COVID-19 cases throughout the fall, and uncertainty regarding the availability of a vaccine for the virus during that time, some households opted to stockpile groceries. While the panic-buying was nowhere near the level seen in March, some hoarding was evident.
- Sales at electronic and appliance stores (up 4.5 per cent) and hobby stores (up 2.2 per cent) showed solid growth as well. Government stimulus programs such as the Canada Emergency Response Benefit (CERB) had allowed household income to rise at a strong pace throughout much of 2020, encouraging consumers to loosen their purse strings at the beginning of the holiday shopping season.
- On the downside, sales at clothing stores fell 3.0 per cent in November and are still about 15 per cent below their pre-pandemic level. With work from home orders and a limitation on social gatherings, demand for discretionary new clothing has continued to lag in recovery. And considering that social restrictions around the country have only tightened since November, it is unlikely that sales at clothing stores have rebounded much since then.
- After taking into account price changes, total sales volumes rose 1.2 per cent in November.
- Sales rose in nine of 10 provinces, with Quebec and Ontario posting the largest gains. Manitoba was the exception, as retail sales in the province fell for the second month in a row.
- Retail e-commerce continued to play a larger role in overall retail trade, rising 2.7 per cent in November. Given the resurgence of COVID-19 cases around the country throughout the fall, it was unsurprising that consumers became more likely to shop online rather than in stores.
- Despite the general positivity surrounding this morning’s release, the gains in retail sales over the past two months mark a significant deceleration compared to the third quarter of 2020. That is in line with our view that the Canadian economy’s recovery had slowed during the final quarter of last year.
- Looking ahead, we expect an uneven recovery in the Canadian economy over the next year. Strict lockdown measures—particularly in the country’s two largest provinces—will hurt the national economy during the first few months of 2021. As distribution of COVID-19 vaccines ramps up this spring, we expect economic growth to pick up sharply during the second half of this year.
- Finally, it is worth nothing the preliminary numbers released by Statistics Canada this morning, which suggest that retail sales fell 2.6 per cent in December. That would mark a significant setback from November’s results, and are likely due, in part, to the more stringent lockdown measures imposed around many parts of the country at the end of 2020.
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