- Building on a solid gain in February, Canadian retail sales continued to advance in March, increasing by 3.6% m/m. The headline was better than Statistics Canada’s preliminary forecast, which called for sales to rise by 2.3%. Adjusting for inflation, the volume of sales posted a slightly softer but still solid increase of 3.2%. Looking ahead, the agency’s flash estimate suggests that sales pulled back by 5.1% in April amid tightening COVID-19 restrictions across most provinces.
- Gasoline (+1.8%) and motor vehicle & parts (+1.4%) sales remained a source of strength with both rising for the third consecutive month. In the case of gasoline, sales were lifted exclusively by higher prices as in volume terms sales at gasoline stations were 0.8% lower than a month ago.
- Core sales, which exclude the two above-mentioned categories, rose even more handsomely than the headline, up +4.7% from the month ago. Aside from the food and beverage stores (-1.3%) where spending slipped for the second month in a row, all other major categories were up. Retailers selling housing-related items, such as furniture (+8.7%) and building materials & garden equipment & supplies stores (+19.8%), led the way. Driven by the frenzy in the real estate market and a boom in renovations, sales at building materials & garden equipment stores were very elevated, up 55% from the pre-pandemic level. Sales at clothing & accessories stores also rebounded strongly (+24%) in March, posting double-digit growth for the second consecutive month. Stores selling sporting goods, hobby items and books also saw a hefty monthly gain (+12.1%).
- Online sales continued to ease for the second month in a row (-1.5%) on the back of more options for in-person shopping. Still, e-commerce made great strides in the pandemic, with online sales up 124% since the pre-pandemic level in February 2020 .
Key Implications
- Retail sales continued to rebound strongly prior to the renewal of virus containment measures during the third wave of the virus, up nearly 11% from the pre-pandemic level. Looking ahead, however, preliminary estimates, combined with spending and mobility data suggest that spending will be weak in April and May. The picture may brighten in June: with caseloads declining and vaccinations rates ramping up significantly across the country, many provinces are slated to start easing restrictions.
- In-store retail sales will get a lift in the summer months from easing restrictions and pent-up demand. However, as reopening expands to include a broad range of service sector firms, there’s also likely to be some substitution from goods to services spending. This could lead to a pullback in sales for some retailers, such as grocery stores with patios and restaurants providing a long-awaited alternative to home-cooking.
- In addition to recovering demand, rising prices will also likely give a boost to sales in nominal terms. Many commodity prices have been rising briskly and prices of goods and services which were most depressed by the pandemic are also starting to recover. Businesses are showing increased willingness to pass higher prices onto consumers. While a stronger loonie will help to offset some inflationary pressures, prices likely to continue to percolate in the near-term as demand accelerates and supply takes time to catch up.
