Retail sales growth slows in August
The recovery in Canadian retail sales is fizzling.
Sales eked out a gain of 0.4 per cent in August, Statistics Canada said Wednesday in Ottawa. That fell short of the 1.1 per cent median forecast in a Bloomberg survey of economists. Excluding vehicles, receipts rose 0.5 per cent, versus a forecast gain of 0.9 per cent.
After cratering in April on mandatory lockdowns, retail sales increased for four consecutive months through August, recovering to pre-pandemic levels in all major categories except cars, gasoline and clothing. But the pace of growth has slowed dramatically since the early summer, and a preliminary estimate from the agency showed receipts were flat in September.
The outlook for retail sales is fairly bleak, with the recent surge in Covid-19 infections forcing some Canadian provinces, including Quebec and Ontario, to tighten up on social distancing measures. Capacity restraints and further shutdowns in the face of a second wave will likely keep a lid on demand.
Wednesday’s results “surprised to the downside,” and “came despite healthy income gains from the recovery in employment, and before the impact of the virus’s second wave, which is expected to add a chill to fall economic activity, Avery Shenfeld, chief economist at Canadian Imperial Bank of Commerce, said in a report to investors.
Core retail sales, which exclude gas and autos, rose 0.4 per cent in August, partly reversing a decline in the previous month, Statistics Canada said. The gain was driven by sales at building materials and grocery stores, and was partly offset by declines at furniture, electronics and sporting goods vendors.
“Consumers continue to drive the recovery, with limited availability of services and travel at least partly redirected into goods spending,” Robert Kavcic, an economist at Bank of Montreal, said in a note to investors. “But, with a lot of pent-up demand and lifestyle-adjustment spending seemingly running its course, this momentum could be tougher to sustain in the quarters ahead.”
It’s a similar story for inflation. Price pressures picked up in September but remained subdued as the economy emerges from the aftermath of the pandemic, Statistics Canada said in a separate report. Annual inflation accelerated to 0.5 per cent in the month, well below normal levels as companies keep prices in check -- giving the Bank of Canada license to keep interest rates at historic lows in order to stoke growth.