- Coming on the heels of an unprecedented decline in April, Canadian retail sales staged an equally historic rebound in May, surging by 18.7% as lockdown measures began to ease. May’s print came in close to the consensus forecast, which called for a 20% increase. The preliminary forecast by Statistics Canada calls for sales to rise by 24.5% in June.
- The increase in sales was mostly a volumes story. Netting out rising prices, volumes were up by 17.5% on the month.
- Sales were up in all but one of the 11 major sectors. Following large drops in April, some of the largest gains were at motor vehicles and parts dealers (+66.3%), clothing and accessories stores (+92.6%), sporting goods, hobby, book & music retailers (+101.2%) and furniture stores (+58.6%). Sales at gasoline stations also rose (+17% in May versus a decline of 32% in April), driven by both higher volumes and prices.
- The gains were less dramatic for other less volatile categories. Sales at personal care stores rose by 5%. Electronics and appliance stores (+12%), and building materials and garden equipment stores (+5.5%) posted modest gains. Meanwhile, food & beverage sales declined on the month (-2%), driven by falling sales at supermarkets and grocery stores, likely because more people ventured out to patios or ordered take-out.
- Retail e-commerce sales remained strong but came off the boil a bit as more brick-and-mortar stores were allowed to reopen. Year-over-year, online sales were up by 112.7%, a modest deceleration relative to the 123.6% gain posted in April.
- Sales rose in all ten provinces. The steepest increases were in Quebec (33.3%), Manitoba (24%) and Maritimes provinces (20.2% in Nova Scotia and 20.5% in New Brunswick). The increase was more muted in Ontario at 14.2%, reflecting a slower reopening process.
Key Implications
- As expected, retail sales rebounded in seesaw-type fashion in May as the grip of the pandemic and the subsequent lockdown measures began to ease. Additionally, the pent-up demand accumulated after months of delayed purchases gave sales a boost, with the strongest gains in categories where the lockdown measures were most extensive (clothing) or which had limited ability to shift sales online (autos).
- Some provinces, such as Ontario, were still relatively early in their reopening plans in May. As a result, sales are expected to continue to rebound in June. Baking in Statistics Canada’s advance estimate for June, retail sales will be just 0.4% away from their pre-pandemic level. Still, even as sales recover, the pandemic wreaked havoc on the retail landscape, reshaping the industry and dramatically accelerating trends that were already in place for some time, such as the shift to online shopping.
- As greater swaths of the economy reopen, this is bringing reprieve to retailers and shoppers, but it also carries risks that increased social interaction will lead to a resurgence in cases and renewed restrictions. The outlook for retail sales depends on the virus trajectory. In that regard, the experience south of the border and the recent uptick in cases in some provinces offers a cautionary tale.
