Retailers feeling supply crunch ahead of holiday season

Retail sales fell by 0.6 per cent month-over-month (m/m) in September, after posting a 1.8 per cent gain in August. In volume terms, sales decreased by 1.1 per cent.
Statistics Canada’s flash estimate for October’s retail sales suggests that sales increased by 1.0 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 9 of 10 provinces. Ontario posted the only decline of all provinces, falling 4.4 per cent. Meanwhile, sales in Quebec (+2.0 per cent) and Alberta (+1.7 per cent) experienced the largest increase.
Sales at gasoline stations rose by just 0.2 per cent, a modest gain compared to the past few months as gas prices held steady in September. Meanwhile, sales at motor vehicle and parts dealers fell by 1.6 per cent.
Core sales (excluding gasoline and motor vehicles) decreased by 0.3 per cent. Clothing stores (-5.9 per cent) witnessed the largest decrease, while food and beverage stores (+1.3 per cent) showed the sharpest gain.

Key insights:

Supply chain disruptions are taking their toll on retail sales by limiting the number of goods retailers can sell. This is particularly evident at automotive dealerships, as the global shortage in semi-conductors has left automakers no choice but to cut production in recent months. The availability of many other goods, such as electronics and appliances, has been hit disproportionally hard by the supply crunch as well.
During the pandemic, retail sales were inflated whenever non-essential in-store shopping was permitted. That reflected strong gains in disposable income from pandemic-related government stimulus and a lack of alternative spending options. But with stimulus measures fading and a return to some semblance of normalcy during the second half of 2021, demand for consumer goods is naturally falling.
Shortages are posing a major risk for retailers as we enter their vital holiday season. Not only are supply disruptions limiting the number of goods that can be sold, but they are putting immense upward pressure on prices, encouraging some consumers to delay spending on big-ticket items.