- After a weak January, retail sales rebounded 4.8% m/m in February, helped by the easing of restrictions in Ontario and Quebec. The headline was slightly better than Statistics Canada’s preliminary forecast, which called for a 4.0% gain. Adjusting for price effects, the volume of sales rose also rose handsomely, up 4.3% on the month. Looking ahead, the agency’s flash estimate points to a 2.3% increase in March.
- Gasoline sales were a source of significant strength in the report (+12.3%) on the back of higher gas prices. Gasoline sales were also higher in volumes terms (+6.8%) with gas stations benefiting from improved mobility trends. Vehicle and parts sales also shifted into higher gear, rising by 5.0%.
- Core sales, which exclude the two categories mentioned above, also rose in February (+3.8%). Gains were broad-based, with most categories faring better on the month. As stores began to reopen, consumers flocked to furniture (+18.0%) and clothing and accessories stores (+23.7%). Despite the double-digit gain on the month, clothing & accessories stores remain the hardest-hit category, with sales still down nearly 30% compared to a year-ago. Stores selling sporting goods, hobby items and books also saw a hefty monthly gain (+23.5%). Meanwhile, housing-related categories, such as sales of elections and appliances (+4.5%) and building materials, garden supplies & equipment (+3.5%), continued to benefit from the ongoing renovation boom and the strength in the real estate market.
- Food & beverage (-1.4%) and health & personal care (-0.8%) stores were the only categories where sales declined in February, however, both remain higher than what they were a year-ago.
- Online sales eased on a month (-5.7% m/m) due to more in-person shopping options. Still, the pandemic continues to be a boon for e-commerce, with online sales up 92% from the year ago.
Key Implications
- Retail sales rebounded in February, and likely in March, amid easing containment measures which took place during that time. However, progress remains highly dependent on the path of the virus, which has since taken a turn for the worse as a vicious third wave led to higher caseloads and hospitalizations. Recent spending and mobility data suggests that retail sales are likely to weaken once again in April amid renewed restrictions and stay-at-home orders.
- While the yo-yo nature of the current operating environment is extremely challenging for retailers, perhaps some consolation could come from the fact that consumers are certainly able and willing to loosen the purse strings once restrictions are eased, as shown by today’s report. A combination of ample household savings, pent-up demand and still-supportive government programs suggests that consumer spending will likely rebound swiftly once economy re-opens. The latest Bank of Canada Survey of Consumer Expectations indicated just that, with consumer spending growth expectations jumping to the highest level since data collection began.
- The third wave of the virus means that Canadian shoppers and retailers will need to wait a bit longer before spending picks up again. Acceleration in the vaccination campaign in recent weeks and modest reduction in new cases offers optimism that better days are not too far ahead.
