Economic commentary provided by Alberta Central Chief Economist Charles St-Arnaud
Retail sales increased in November, but the preliminary estimate for December suggests the floods in BC and the re-imposition of restrictions to slow the spread of COVID-19. This setback in retail sales is likely to be temporary, but supply chain woes are expected to continue to hold back retail sales. In addition, a return to more normal spending behaviour could also lead to an under performance in retail sales, as spending shifts from goods to services (restaurants, bars, personal care, etc).
In Alberta, retail sales performance remains in line with the rest of the country. Moreover, we note a convergence in retail sales between Calgary, Edmonton and the rest of the province after some divergence likely due to a more acute fourth wave of COVID-19 infections in the rest of the province.
The question for the retail sales’ outlook remains whether households will spend the savings accumulated during the pandemic later in 2022 or whether households will show some restraint and increase precautionary saving and repay debt, especially in light of rising interest rate.
Retail sales increased by 0.7% month-on-month in November. Compared to the same month last year, retail sales rose +4.4% year-on-year. The level of retail sales is 11.7% above its pre-pandemic level. Statistics Canada also reports that retail sales dropped by 2.1% in December based on a preliminary estimate.
Monthly sales increased in 6 out of 11 sub-sectors. On the month, the rise in retail sales resulted mainly from a higher sales at gasoline stations (+4.9% month-on-month), in part due to higher prices, and at building material and garden centres (+3.0% month-on-month). These gains were partly offset by declines at furniture, electronics and appliance stores (-1.1% m-o-m), general merchandise stores (-1.2%) and motor vehicles and parts dealers (-0.3% month-on-month). Core retail sales, which exclude motor vehicles and parts and gasoline stations, rose 0.5% m-o-m (+1.7% year-on-year).
In volume terms, retail sales inched higher by 0.2% on the month (+0.1% year-on-year) and core retail sales eased by 0.2% on the month (-1.1% year-on-year).
In Alberta, retail sales inched higher by 0.1% month-on-month in November (+6.9% year-on-year). The level of sales in the province was 14.3% higher than before the pandemic. Retail sales rose in most sectors led by motor vehicle and parts dealers (+3.0% month-on-month), gasoline stations (+3.2% month-on-month), and building material and garden centres (+6.0% month-on-month). A decrease at food stores (-2.1% month-on-month), clothing and footwear stores (-2.3% month-on-month) and furniture, electronics and appliances stores (-3.8% month-on-month) offsets part of the increase.
Core retail sales decrease by 1.8% m-o-m (+0.6% year-on-year) since most of the rise in headline retail sales is due to the motor vehicle and parts sector and gasoline stations. Although there are no official volume details at the provincial level, we estimate that retail sales volumes in the province declined by 0.4% m-o-m (+2.5% year-on-year).
Statistics Canada has recently started to release retail sales numbers for Calgary and Edmonton. The data shows some convergence between regions. As such, retail sales in Calgary increased by 7.8% year-on-year, by 11.6% year-on-year in Edmonton and by 0.4% year-on-year in the rest of the province. After a period of under performance, it seems Calgary and the rest of Alberta may be catching up to Edmonton. The lack of details makes it hard to determine the exact cause of divergences in retail sales between regions. However, a more acute fourth wave of COVID infections outside of the main metropolitan areas could explain the weakness seen in previous months. Moreover, the recent employment reports also suggest that the recovery in the labour market has been stronger in Calgary and Edmonton than in the rest of the country.
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