Canadian retail sales were flat in March as a slump in new car sales offset healthy consumer spending gains elsewhere, Statistics Canada reported. Total retail sales in Canada hit $60.1 billion in March, virtually unchanged from the month before, the federal agency said.
The result compared with an initial estimate for the month that suggested sales rose 1.4%. The preliminary estimate for April indicates retail sales rose 0.8% for the month, but the agency cautioned the figure will be revised.
“With a rotation of demand away from goods and towards services, we would expect retail sales to slow in coming months,” Karyne Charbonneau, executive director and senior economist with CIBC Capital Markets, said in an email.
For March, retail sales figures show healthy growth outside of vehicle sales. Statistics Canada said sales were up in 10 of the 11 subsectors it tracks, representing 75% of retail trade. However, sales at motor vehicle and parts dealers fell 6.4% as new car dealers saw a drop of 5.9%, the agency said.
“A lack of supply, as chip shortages hamper production, continues to weigh on vehicle sales,” Benjamin Reitzes, managing director of Canadian rates and macro strategist with BMO Capital Markets, said in a client note. “That’s been a theme for some time, but is expected to ease as we work through 2022.”
Sales at gasoline stations rose 7.4% in March, but Reitzes said “a good chunk of that underlying strength was due to broadly higher prices.”
Core retail sales — which exclude gasoline stations and motor vehicle and parts dealers — increased 1.5% in March. The increase was led by higher sales of building material and garden equipment and supplies, which climbed 3.7%, Statistics Canada said.
Clothing sales also continued to post strong gains with a 2.2% increase following the strong 15.5% hike from February. The increase in clothing sales reflects the growing number of workers returning to the office and upgrading their wardrobe, Charbonneau said in a client note.
In volume terms, retail sales fell 1% in March. Economists have suggested that sales volumes — the total number of items sold — could face headwinds as inflation drives prices higher.
“It’s clear that inflation is eroding purchasing power,” Reitzes said. Consumer enthusiasm could wane in the months ahead as higher interest rates ripple through the economy, he added.
“We expect the impact of surging inflation on household disposable incomes to be a stronger headwind to sales volumes in (the second quarter) and in the second half of the year,” Charbonneau said. Meanwhile, retail sales grew roughly 2.7% compared to the same time in 2021, she said. However, that gain comes from higher prices given sales volumes fell 5.1% compared with March 2021, Charbonneau said.
Retail e-commerce sales were down 1.9% in March on a seasonally adjusted basis compared with a year ago, she said. On an unadjusted basis, online retail sales fell 24.6% year-over-year, she said. However, that comparison is against a period where non-essential retailers were still impacted by the pandemic and many Canadians looked to online sales to avoid going outside their homes, Charbonneau said.