Concerning results for retail sales ahead of global pandemic
Signal49 Research’s Economist Richard Forbes offers the following insights on today’s release of data on retail trade.
Today’s Statistics Canada release showed that retail sales rose 0.4 per cent in January. After increasing just 1.6 per cent last year, retail sales in Canada are off to a sluggish start in 2020. However, the release precedes the COVID-19 outbreak in Canada, and the results from January will not be enough to offset the declines in retail trade we expect over the next few months.
- Retail sales rose a sluggish 0.4 per cent in January, its third consecutive monthly increase.
- Sales rose in 4 of 11 subsectors. The largest gains were in motor vehicle and parts dealers, where sales increased by 1.8 per cent.
- After taking into account price changes, total sales volumes fell a worrisome 0.3 per cent.
- Sales rose in eight provinces, with Quebec showing the strongest increase in terms of magnitude. Meanwhile, sales fell in Ontario and Newfoundland following gains in December.
- Today’s Statistics Canada release is concerning considering that the Canadian economy has since gone into tailspin due to the COVID-19 outbreak.
- The release reinforces our forecast that retail sales will post modest gains during the first quarter of 2020, before falling in the second quarter. The COVID-19 outbreak is encouraging consumers to stay home when possible and forcing many brick and mortar stores to close or reduce their hours of operation. That will hurt retail sales throughout the next few months.
- After the global pandemic is settled, retail sales will not improve enough to avoid their weakest annual gain since 2009. As a whole, we expect retail sales to grow just 1.1 per cent in 2020. Slower gains in household disposable income compared to the past few years, and a higher household savings rate are key factors weighing on our outlook beyond the next few months.
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