Encouraging news for retailers: Statistics Canada report

Andrea Piacquadio

The federal agency reported that retail sales increased 0.6% to $66.5 billion in September. Sales were up in four of nine subsectors and were led by increases at motor vehicle and parts dealers (+1.5%). Core retail sales—which exclude gasoline stations and fuel vendors and motor vehicle and parts dealers—were down 0.3% in September. In volume terms, retail sales increased 0.3% in September. Retail sales were up 0.6% in the third quarter, while in volume terms, retail sales declined 0.5%.

“Statistics Canada is providing an advance estimate of retail sales, which suggests that sales increased 0.8% in October. Owing to its early nature, this figure will be revised. This unofficial estimate was calculated based on responses received from 48.7% of companies surveyed. The average final response rate for the survey over the previous 12 months was 88.6%,” it said.

The largest increase to retail sales in September came from motor vehicle and parts dealers (+1.5%). The gain was led by higher sales at new car dealers (+2.4%). The largest decline in this subsector came from used car dealers (-2.0%), followed by other motor vehicle dealers (-1.5%), said the federal agency. Also contributing to the increase in retail sales in September were higher sales at gasoline stations and fuel vendors (+3.2%). In volume terms, sales at gasoline stations and fuel vendors increased 2.3%.

“Core retail sales decreased 0.3% in September, led by lower sales at sporting goods, hobby, musical instrument, book and miscellaneous retailers (-1.6%) and food and beverage retailers (-0.4%). Sales at food and beverage retailers were down on lower sales at beer, wine and liquor retailers (-1.8%), supermarkets and other grocery retailers (except convenience retailers) (-0.2%) and specialty food retailers (-0.4%),” it said.

“The largest increase to core retail sales in September came from general merchandise retailers (+0.3%). Sales were up in this subsector for the third consecutive month.

“Retail sales increased in eight provinces in September. The largest provincial increase was observed in Ontario (+0.3%), led by higher sales at motor vehicle and parts dealers. In the census metropolitan area of Toronto, sales were down 0.6%. In Alberta, retail sales were up 0.9% in September. The increase was driven by higher sales at general merchandise retailers. The largest provincial decrease in September was observed in New Brunswick (-0.2%), led by lower sales at motor vehicle and parts dealers. After their decline in August, retail sales in the Northwest Territories increased 26.6% in September.

“On a seasonally adjusted basis, retail e-commerce sales were down 0.6% to $3.8 billion in September, accounting for 5.8% of total retail trade.”

Katherine Judge, Senior Economics at CIBC Capital Markets, said the Canadian consumer perked up at the end of the third quarter, with the 0.6% rise in nominal retail sales well above the consensus estimate for a flat reading.

“The strength was concentrated in autos and gasoline, as sales elsewhere declined by 0.3%. And while volumes advanced in September, for the third quarter as a whole, sales volumes dropped by 2.1% annualized, compounding the weakness seen in Q2. The momentum seen in September, while possibly extending into October given the advance sales estimate, will likely be temporary given the climb in the unemployment rate that’s underway, alongside the renewal of mortgages at higher interest rates that will work to squeeze consumers,” she said.

“The 1.5% jump in auto sales followed two consecutive months of declines as the port strike constrained activity, and that left the level of sales below what was seen in Q2. While supply chain normalization has been a boon for auto sales over the past year, we expect tighter financing conditions to weigh on sales ahead as pent-up demand fades, and activity normalizes following the port strike. The increase in gasoline sales was a surprise given lower average gasoline prices over the month, and that reflected higher sales volumes.

“Looking at discretionary core categories, signs of consumer weakness were clear, as sales of clothing, sporting goods, and furniture all declined. The slowdown in the housing market that’s underway should also limit sales of furniture more ahead. The core group of sales is up by 1.7% y/y, but is down by 0.9% y/y in per-capita terms.

“The advance estimate for October suggested that sales got off to a solid start in Q4, with a 0.8% rise. However, that could have again been an auto sector story given industry reports of a surge in unit auto sales in that month. Auto sales volumes tend to impact GDP less than ex. auto volumes, as they tend to be lower value added as a percentage of sales than some other categories where margins are higher.”

Mario Toneguzzi

Mario Toneguzzi is Managing Editor of Canada’s Podcast. He has more than 40 years of experience as a daily newspaper writer, columnist, and editor. He was named in 2021 as one of the Top 10 Business Journalists in the World by PR News – the only Canadian to make the list