Canadian Retail Sales Go From Hot to Warm in Q2
The latest data from Statistics Canada show that total Q2 2016 Canadian retail sales were up 3.6% year-over-year on a not seasonally adjusted basis. This was well off from the 5.6% increase for the first quarter of the year, and so it appears that retail sales growth is slowing down.
On the other hand, the 3.6% Q2 increase was still higher than for any quarter last year, 2015. The surge in retail at the start of 2016 was an anomaly, and things are now unsurprisingly cooling off. But at least retail sales growth appears to be settling in at a relatively favourable level. Total retail is up 4.5% after 6 months in 2016, which is a significant improvement on the 1.7% annual gain seen for all of 2015.
The 3 month trend (orange line in the above chart) has softened in the last couple of months, although it is still somewhat ahead of the underlying 12 month trend (green line). At this point, the outlook for the rest of 2016 appears to be in the "good but not great" range.
Food & Drug
The Food & Drug sector's retail sales are more or less on the same path. Growth softened through most of 2015, then surged ahead in Q1 2016, but has now come down to a more modest level. Retail sales increased 2.7% year over year in Q2 2016, down from the 4.1% gain in Q1, and about equal to the 2.6% gain for all of last year.
Supermarkets & other grocery stores, which account for over half of this sector, continue to fall behind retail averages. After gaining just 1.4% in 2015, their sales were up only 0.7% year-to-date after 6 months of 2016. Trends in the much smaller specialty food stores category however were even worse, with a 2.9% decline in retail sales in Q2 2016.
On the other hand, retail sales at health & personal care stores are going gangbusters. Year-to-date sales are up 8.0% after 6 months in 2016, the best first half year gain since 2007.
The Store Merchandise sector is out-performing Food & Drug overall. Retail sales were up 4.5% year-over-year in Q2 2016, although this was less than the 6.5% gain for Store Merchandise in Q1. The 3 month trend (orange line in the chart) is now about equal to the underlying 12 month trend (green line), indicating fairly steady conditions ahead.
After 6 months, year-to-date Store Merchandise retail sales were up 5.4%. This is markedly ahead of the 3.9% annual increase recorded for 2015.
Almost all store types in this sector had the same pattern in retail sales, with a strong Q1 followed by a return to more normal growth levels in Q2. On a year-to-date basis, shoe stores and building material & garden equipment/supplies dealers are out-performing the sector average, while jewellery, luggage & leather goods stores and electronics & appliance stores are falling behind.
Note that Statistics Canada is now suppressing the breakdown of general merchandise stores for confidentiality reasons. The figures in the table below are estimates based on previous trends.
Automotive & Related
New car dealer sales were up "only" 6.8% year-over-year in Q2 2016. This would be a good result for most retailer types, but it was less than half of the 14.8% gain new car dealers achieved in Q1.
Gasoline stations are the next largest subgroup in this sector and their retail sales were down "only" 4.4% in Q2, compared to a decline of 9.2% in Q1.
In general, auto dealer sales are becoming "less good", while gasoline station sales are becoming "less bad". How these two trends play out over the rest of the year is yet to be seen.
By The Numbers
For definitions of store types, see Statistics Canada.
Monthly Update Notification
This analysis is updated monthly as new numbers are published by Statistics Canada. If you would like notification of when an update becomes available (and you've read this far), please connect with Ed Strapagiel on LinkedIn.
20 August 2016