February 26, 2010
Economy at a Glance
Canadian retail sales in December OK, verging on pretty good
Current-dollar national retail sales in December 2009 were +0.4% month to month and +6.7% year over year, according to Statistics Canada. On a three-month moving average “smoothed” basis, they were +2.1% year over year.
These are OK to verging on pretty good numbers – considering the early stage of the recovery – and set the stage for better times to come.
A key benchmark figure for retail sales is +5.0% year over year in nominal dollars. After factoring out “normal” inflation of around 2.0%, that means +3.0% real growth for consumer spending.
Such a figure lays down a solid base for gross domestic product (GDP) growth since consumer spending is 55% of Canada’s total output. Canada’s January inflation rate was +1.9%.
Canada’s total retail sales are now only 2% below their most recent peak level in September 2008. Moreover, some important sub-sectors have recovered nicely.
Year-over-year smoothed auto sales were +5.2%, home centres and hardware stores were +3.1% and furniture, home furnishings and electronics stores were -2.1% after a trough figure of nearly -10.0% in mid-2009.
Wholesale trade figures have also been picking up over the last three months. In total, they now stand only -4.1% year over year, whereas they had been -10.0% in the summer of last year.
Regional comparisons
Regionally, the weakest year-over-year change in nominal retail sales occurred in Alberta (only +0.7%). Alberta has also turned in the weakest performance on the jobs front lately.
Employment in the province in January 2010 was -1.6% versus the national average of “no change.” Nova Scotia (+10.1%), British Columbia (+8.7%) and Ontario (+8.4%) had strong retail sales gains.
It is always interesting to compare Canada with the U.S. The U.S. is a month ahead in reporting retail sales. U.S. “smoothed” retail sales in January 2010 were +4.3%, which was a dramatic improvement from the year-ago (i.e. January 2009 versus January 2008) performance of -11.0%
Canada vs U.S.
However, U.S. retail sales in the recession fell a lot further than they did in Canada. They remain 7.4% below their peak level of November 2007. As hinted at earlier, Canada’s relatively better performance in retail trade has been a function of better labour markets. Canada has lost 300,000 jobs from peak to trough.
The U.S. has lost eight million, a much higher number on a population-proportional basis. Furthermore, Canada never did suffer a decline in service sector jobs. Not only has this been an indicator of better retail sales in Canada, it has also helped to support them.
For more articles by Alex Carrick on the Canadian and U.S. economies, please see his market insights. Mr. Carrick also has an economics blog. His personal blog is at www.alexcarrick.com
*"Year over year" is each month versus the same month of the previous year.
Based on latest three-month averages of current dollar adjusted data (and placed in latest month).
Data source: Statistics Canada. Chart: Reed Construction Data - CanaData.
