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

Bottom line

Retail saw a rebound in part due to the continued lifting of COVID-related restrictions across Canada, after some temporary correction in July, as consumers shifted from spending on goods to spending on services. The preliminary estimate for September suggests retail sales declined 1.9% month-over-month. Part of this weakness is likely the result of some consumers avoiding public spaces in light of the fourth wave of COVID infection; hence it should be temporary.

However, some weakness in retail sales should be expected in the coming months, even without rising COVID infections. After spending mainly on goods over the past year, spending on services should outperform as the economy reopens, leading to some under performance in retail sales.

In Alberta, retail sales performance was slightly weaker than in the rest of the country, likely due to a more acute fourth wave in the province, something real-time indicators of economic activity suggest continued in September. We also note the continued out-performance of retail sales in the Edmonton area. This is likely supported by a stronger local labour market than the rest of the province, having recovered all the job losses due to the pandemic and an unemployment rate below its pre-pandemic level.

The question for the retail sales’ outlook remains whether households will spend the savings accumulated during the pandemic later in 2021 and 2022 or whether households will show some restraint and increase precautionary saving and repay debt.

Retail sales rose by 2.1% month-over-month in August, as the reopening of the economy brings back consumers to stores. Compared to the same month last year, retail sales rose +8.4% year-over-year. The level of retail sales is 10.1% above its pre-pandemic level. Statistics Canada also reports that retail sales dropped by 1.9% in September, based on a preliminary estimate.

Monthly sales improved in nine out of 11 sub-sectors. On the month, the rise in retail sales resulted mainly from an increase in sales at food and beverage stores (+4.8% month-over-month), gasoline stations (+2.3% month-over-month) and clothing and footwear (+3.9% month-over-month). These gains were partly offset by a decline in furniture and appliances stores (-2.1% month-over-month). Core retail sales, which exclude motor vehicles and parts and gasoline stations, rose by 2.7%.

In volume terms, retail sales increased by 1.4% on the month (+5.4% year-over-year) and core retail sales by 2.2% on the month (+4.4% year-over-year).

In Alberta, retail sales improved by 0.4% month-over-month in August (+12.8% year-over-year). The level of sales in the province was 8.4% higher than before the pandemic. The detail shows mixed performance by the various sectors. Retail sales increase the most at gasoline stations (+1.3% month-over-month), building material and gardening centres (+0.8% month-over-month) and clothing and footwear stores (+0.9% month-over-month). There were declines at motor vehicles and parts dealers (-4.5% month-over-month), food stores (-3.9% month-over-month) and health and personal stores (-1.1% month-over-month). Core retail sales increased by 2.3% month-over-month (+8.2%year-over-year). Although there are no official volume details at the provincial level, we estimate that retail sales volumes in the province decreased by 0.3% month-over-month (+9.5% year-over-year).

Statistics Canada has recently started to release retail sales numbers for Calgary and Edmonton. The data continue to show some divergence between regions. As such, retail sales in Edmonton increased by 15.6% year-over-year, while sales in Calgary rose 10.1% year-over-year and by 9.1% year-over-year in the rest of the province. Retail sales in Edmonton have outperformed Calgary and the rest of the province for some months. The lack of details makes it hard to determine the exact cause of Edmonton’s retail sales strength. However, a more robust labour market in Edmonton, with the region having recouped all the job losses during the recovery, could explain the out-performance of the provincial capital relative to the rest of Alberta.

Independent Opinion

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