Canada’s Retail Trade Industry: Industrial Outlook Spring 2006

Consumer spending will rise at a more modest pace this year than last because of higher energy costs, a weakening housing market and higher interest rates. Auto sales are also decelerating this year, owing to the end of last year’s incentive programs. Overall retail profits will therefore slip from $11.2 billion in 2005 to $9.6 billion this year.

Although sturdy growth in unit sales is expected to boost revenues throughout the outlook period, price growth will be mitigated, especially for electronic goods. Also, the strong Canadian dollar has helped retailers keep cost growth in check by reducing the cost of imports, but intense competition within the retail sector will ensure that most of the recent cost savings will soon be passed on to consumers.

Profits are expected to drop once more next year before starting to climb again, reaching $11 billion again in 2010, as retailers improve their productivity.