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Canadian Retail Sales Hit A Speed Bump

Well, it had to happen. Total year-to-date Canadian retail sales were up a revised 5.8% on a not seasonally adjusted basis after 4 months of 2016. This really was higher than the market could bear, given less than sterling economic conditions. The latest data from Statistics Canada show that May retail sales were up just 1.5% year-over-year. The initial surge in 2016 retail sales has now hit a speed bump.

The 3 month trend (orange line in the above chart) softened considerably in May, although it is still well ahead of 2015 levels. The underlying 12 month trend (green line), which had been improving since late last year, has stalled somewhat. The outlook for 2016 nevertheless still looks positive and is running ahead of last year.

The retail speed bump is apparent in all retail sectors and is not caused by just one store type. Every province and region also had lower sales growth in May than in the first 4 months of 2016.

Food & Drug

Retail sales in the Food & Drug actually declined in May, down 0.7% year-over-year. After a strong start to 2016, the trend lines have now cooled off to more typical levels.

Supermarkets & other grocery stores had a particularly tough May, with sales down 4.4% from a year ago. This wiped out almost all the gains made at the start of 2016. Specialty food stores also had a bad month, with retail sales off 4.5% year-over-year.

As usual, health & personal care stores came to the rescue, with a 7.0% retail sales gain in May. No speed bump here. In fact, drug stores and pharmacies' sales growth has beaten the overall retail average in each of the last 12 months.

Store Merchandise

The Store Merchandise sector also shows a cooling off after a hot start to 2016. May retail sales were up 2.8% year-over-year, after gains of 6%-plus in each of the first 4 months of the year. The 3 month trend (orange line in the chart) however is still at a relatively high level, and is still running ahead of the underlying 12 month trend (green line).

Almost all retailer types hit the speed bump in May. Some of the most affected included clothing stores (up 1.8% in May versus up 7.6% for the first 4 months of 2016), furniture stores (down 0.5% in May versus up 10.0% previously), and sporting goods, hobby, book & music stores (up 0.6% in May versus up 7.7% previously).

General merchandise stores' retail sales gained 6.2% for the first 4 months of the year but also fell off in May to a 2.8% gain. On the other hand, that's still better than the 2.1% they gained in retail sales for all of 2015. (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.)

Electronics & appliance stores ran contrary to the general trend affecting most retailers. Their retail sales improved in May with a gain of 2.9%, after being down 1.1% for the first 4 months of the year.

Automotive & Related

The automotive & related sector generally features strong gains in vehicle sales offset by continuing sales declines at gasoline stations. The interplay of these two trends makes for a wild ride.

After gaining 13.5% year-to-date to April, automobile dealers' sales were up "only" 4.9% in May. That however was still 3 times the overall retail average.

At gasoline stations, May retail sales were down "only" 4.8%, after declining 7.7% in first 4 months of the year and 13.9% in 2015.

For May at least, it appears that auto dealer sales are becoming "less good", while gasoline station sales are becoming "less bad". Both still have a way to go before performing like the rest of retail.

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.

23 July 2016