Economic commertary provided by Alberta Central Chief Economist Charles St-Arnaud.
Bottom line
Retail sales posted another decline in March, confirming that the solid end of 2023 was unsustainable. However, while the preliminary estimate suggests a rebound in April and a positive starting point for Q2, this strength is likely to prove temporary. 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 2.2% y-o-y in March, while core retail sales were down (-2.9% 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 and to higher interest rates on debt payments. The strong population growth and the resilience in the labour market so far are a source 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 declined 0.2% m-o-m in March, weaker than expected. Compared to the same month last year, retail sales rose 1.9% y-o-y. Statistics Canada also reports that retail sales are estimated to have increased 0.7% m-o-m in April based on a preliminary estimate.
Monthly sales were lower in 7 out of 9 subsectors. Most of the decline was at furniture, electronics and appliances (-1.6% m-o-m, -3.6% y-o-y), clothing, footwear and accessories (-1.6% m-o-m, -3.5% y-o-y), sporting goods, hobby, books, and others (-1.5% m-o-m, -6.9% y-o-y), and food and beverage (-0.4% m-o-m, +0.6% y-o-y). Higher spending at motor vehicle and parts dealers was the main increase in March (+1.0% m-o-m, +1.9% y-o-y).
Core retail sales, which excludes motor vehicles and parts and gasoline stations, declined 0.6% in March (+1.2% y-o-y).
In volume terms (i.e. adjusted for inflation), retail sales declined 0.4% in March (+1.2% y-o-y). Core retail sales are estimated to have dropped 0.7% on the month (+0.3% y-o-y).
At the province level, most provinces saw lower retail sales in March. Sales declined the most in Saskatchewan (-3.4% m-o-m), Newfoundland (-3.4% m-o-m), BC (-0.4% m-o-m), Ontario (-0.3% m-o-m), and Manitoba (-0.3% m-o-m). On the flip side, there were solid increases in PEI (+0.7% m-o-m), Quebec (+0.6% m-o-m), Nova Scotia (+0.5% m-o-m), and Alberta (+0.3% m-o-m).
Focusing on the y-o-y changes, the value of retail sales increased the most in New Brunswick (+9.6% y-o-y), Nova Scotia (+6.4% y-o-y), PEI (+6.4% y-o-y) and Newfoundland (+5.1% y-o-y). On the flip side, sales have declined compared to last year in Saskatchewan (-0.9% y-o-y), Alberta (-0.4% y-o-y), and BC (-0.4% y-o-y).
Looking at the value of core retail sales, we estimate they increased the most in New Brunswick (+3.1% y-o-y), Newfoundland (+1.8% y-o-y), Nova Scotia (+1.0% y-o-y), and Quebec (+0.6% y-o-y). However, they declined in BC (-0.7% y-o-y), Manitoba (-0.7% y-o-y), and Ontario (-0.3% y-o-y).
In volume terms, we estimate retail sales increased the most in New Brunswick (+8.4% y-o-y), PEI (+5.3% y-o-y), Nova Scotia (+5.3% y-o-y), and Newfoundland (+4.0% y-o-y). They declined in Saskatchewan (-1.9% y-o-y), BC (-1.5% y-o-y), and BC (-1.4% y-o-y).
In Alberta, retail sales increased 0.3% m-o-m in March (-0.4% y-o-y). Higher sales at motor vehicles and parts dealers was the main source of strength. We estimate that core retail sales increased by 0.6% 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 declined 1.3% 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 declined by 8.2% y-o-y while they decreased by 0.7% y-o-y in Edmonton and 0.5% y-o-y in the rest of the province.
The core measure also shows regional disparities, with sales declining by 4.8% y-o-y in Calgary, while they rose by 4.6% in Edmonton and 2.2% in the rest of the province.
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Independent Opinion
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