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Reversal of Fortune: Canadian Retail Sales Cool Off

Total Canadian retail sales were up only 0.2% in July 2016 from the same month a year ago, according to the latest numbers from Statistics Canada and on a not seasonally adjusted basis. This was the lowest such gain for any month so far this year, and well off the 4.5% overall retail sales increase for the first half of 2016. It appears that the bloom is off the rose going into the back half of the year.

The 3 month trend (orange line in the above chart) softened appreciably in July. As a result, the underlying 12 month trend (green line) has now flattened and is in danger of heading down.

Many different store types experienced this reversal of fortune in July. The same pattern also occurred in every province and region. Such widespread effects imply that overall Canadian economic conditions are to blame, which does not portend well for the rest of 2016.

Food & Drug

After a strong start to the year, retail sales growth in the Food & Drug sector has come down to more normal levels. In July, sales were up just 2.1%, somewhat off the 2.8% gain recorded for Q2 2016. Both the 3 month and 12 month trends have now entered unremarkable territory.

Health & personal care stores continue to lead this sector, with 4.7% year-over-year retail sales growth in July. This is way ahead of the overall retail average, but still down from their 8.0% year-to-date increase for the first 6 months of the year.

At the other extreme, specialty food stores are struggling, with sales down 0.2% year-to-date and down 2.6% in July alone.

Supermarkets & other grocery stores had a modest but "okay" 1.4% retail sales gain in July, and are now up just 0.9% year-to-date in 2016.

Store Merchandise

The Store Merchandise sector also cooled in July, recording a 3.1% retail sales increase after being up 5.4% in the first 6 months of the year. The 3 month trend (orange line in the chart) has weakened considerably in the last few months. The underlying 12 month trend (green line) has now flattened out and is poised to soften further.

Many retailer types had a downturn in sales growth in July, including general merchandise stores, furniture stores, home furnishings stores, electronics & appliance stores, and building material & garden equipment/supplies dealers. Clothing stores and shoe stores led the sector with 5.2% and 8.0% retail sales gains respectively in July, but both these results were below their previous year-to-date gains.

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

After clocking in industry high retail sales gains for about the last 2 years, new car dealer sales appeared to fall off a cliff in July. Sales for the month declined 1.4% year-over-year, compared to a gain of 10.1% in the first half of 2016.

At the same time, gasoline stations, whose sales had been in recovery mode, experienced a setback. July retail sales at gas stations were down 8.8%.

At one time, it was the Automotive & Related sector that was driving (apologies) sales growth in the Canadian retail industry. Now it's becoming the other way around.

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.

26 September 2016