Economic commentary provided by Alberta Central Chief Economist Charles St-Arnaud. 

Bottom line

Retail sales rebounded in April. However, the preliminary estimate suggests that the rebound will be temporary and that retail sales will remain lacklustre. As such, it is interesting to note that the level of core retail sales in volume has been mostly unchanged since Spring 2022 (Fig 1).

Retail sales remain driven by population growth, and consumers remain cautious. As such, we estimate that retail sales adjusted for inflation and population growth were lower by 2.6% y-o-y in April, while core retail sales were also down (-2.4% y-o-y). Most provinces are estimated to have seen a decline in core spending per capita adjusted for inflation, suggesting that individual households are reducing their spending (see Fig 4).

Some regional divergences remain, with retail sales per person being stronger in the Atlantic provinces and weaker in the Western provinces. We noted that there is a link between the strength in consumer spending and indebtedness and insolvencies, with much weaker retail sales in provinces with higher debt and insolvencies (Ontario and provinces westwards).

The outlook for retail sales and consumer spending more broadly remains subdued as consumers continue to adapt to the shock to their purchasing power While the recent and upcoming rate cuts are expected to provide some relief, we believe consumer spending will remain subdued. The strong population growth and the resilience in the labour market so far are the main sources of support for household spending. A weakening of the labour market, especially job losses, could lead to significant underperformance in consumer spending and the economy more broadly (see Will it be a hard landing or a soft landing? The labour market will decide).

Retail sales jumped higher by 0.7% m-o-m in April, in line with expectations. Compared to the same month last year, retail sales rose 1.8% y-o-y. Statistics Canada also reports that retail sales are estimated to have declined 0.6% m-o-m in May based on a preliminary estimate.

Monthly sales were higher in 7 out of 9 subsectors. Most of the increase was at gasoline station (+4.5% m-o-m), sporting goods, hobby, books and others (+3.4% m-o-m), clothing, footwear and accessories (+2.1% m-o-m), and food and beverage retailers (+1.9% m-o-m). Lower spending at motor vehicle and parts dealers was the main decline in April (+2.2% m-o-m, +1.9% y-o-y).

Core retail sales, which excludes motor vehicles and parts and gasoline stations, rose 1.4% in April (+1.5% y-o-y).

In volume terms (i.e. adjusted for inflation), retail sales increased 0.5% in April (+0.8% y-o-y). Core retail sales are estimated to have risen 1.2% on the month (+0.8% y-o-y).

At the province level, most provinces saw higher retail sales in April. Sales increased the most in Saskatchewan (+8.4% m-o-m), Alberta (+3.1% m-o-m), Newfoundland (+2.7 m-o-m), and New Brunswick (+2.2% m-o-m). On the flip side, there were decreases in Ontario (-1.0% m-o-m) and Nova Scotia (-0.5% m-o-m).

Focusing on the y-o-y changes, the value of retail sales increased the most in PEI (+9.8% y-o-y), Newfoundland (+8.9% y-o-y), New Brunswick (+7.8% y-o-y), and Saskatchewan (+5.6% y-o-y). On the flip side, sales have declined compared to last year in Nova Scotia (-1.5% y-o-y) and Ontario (-0.6% y-o-y).

Looking at the value of core retail sales, we estimate they rose the most in PEI (+6.9% y-o-y), Manitoba (+5.7% y-o-y), Saskatchewan (+3.5% y-o-y), and Newfoundland (+2.5% y-o-y). However, they declined in Nova Scotia (-1.3% y-o-y) and Ontario (-0.6% y-o-y).

In volume terms, we estimate retail sales increased the most in PEI (+8.8% y-o-y), Newfoundland (+7.8% y-o-y), New Brunswick (+6.8% y-o-y), and Saskatchewan (+4.6% y-o-y). However, they declined in Nova Scotia (-1.5% y-o-y) and Ontario (-0.9% y-o-y)

In Alberta, retail sales jumped 3.1% m-o-m in April (+3.0% y-o-y). A surge in sales at motor vehicles and parts dealers (+13.1% m-o-m) was the main source of strength. We estimate that core retail sales decreased by 1.8% y-o-y in April. Although there are no official volume details at the provincial level, we estimate that retail sales volumes in the province rose 2.9% y-o-y in April.

Statistics Canada also releases retail sales numbers for Calgary and Edmonton. The data shows some divergence between regions. As such, retail sales in Calgary increased by 1.3% y-o-y while they rose by 8.8% y-o-y in Edmonton and 4.5% y-o-y in the rest of the province.

The core measure also shows regional disparities, with sales declining by 1.8% y-o-y in Calgary, while they rose by 3.6% in Edmonton and 2.9% in the rest of the province.


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Independent Opinion

The views and opinions expressed in this publication are solely and independently those of the author and do not necessarily reflect the views and opinions of any organization or person in any way affiliated with the author including, without limitation, any current or past employers of the author. While reasonable effort was taken to ensure the information and analysis in this publication is accurate, it has been prepared solely for general informational purposes. There are no warranties or representations being provided with respect to the accuracy and completeness of the content in this publication. Nothing in this publication should be construed as providing professional advice on the matters discussed. The author does not assume any liability arising from any form of reliance on this publication.