Canadian retail sales fell 1.8% to $57 billion in December as the spread of the Omicron variant and severe flooding in British Columbia and the Atlantic provinces disrupted transportation, retail operations and sales, Statistics Canada said. It’s the largest decline recorded since April 2021, when regions across the country implemented heightened COVID-19 restrictions, the agency said.

The drop was even more significant after stripping away the impact of higher prices, with retail sales volumes down 2.5% in December, TD Economics economist Ksenia Bushmeneva said. “Retail sales ended the year on a weaker footing, with public health restrictions weighing on mobility and spending in December,” she said in a client note.

Sales were down in eight of 11 subsectors, representing 62.9 % of retail trade, Statistics Canada said. Sales at clothing and clothing accessories stores were down 9.5% while furniture and home furnishings stores recorded an 11.3% drop in sales.

Core retail sales — which exclude gasoline stations and motor vehicle and parts dealers — decreased 2.4%, the agency said. Retail e-commerce sales also slipped in December, down 14.2% year-over-year to $4.1 billion in December or 6.5% of total retail trade.

Statistics Canada’s preliminary estimate for January pointed to an increase in retail sales of 2.4% for the month, but the agency cautioned the figure would be revised. Easing restrictions and gradually improving supply chain bottlenecks should lead to an improvement in stores’ traffic and retail sales over the next couple of months, Bushmeneva with TD Economics said. Yet beyond the initial rebound, she said the outlook on retail sales is mixed.

“Easing public health restrictions are expected to prompt consumers to redirect their spending away from goods and toward services, such as travel, dining out, and entertainment,” Bushmeneva said. “A rebound in spending on services, alongside rapidly rising consumer prices and higher interest rates, will leave less wiggle room in household budgets to spend on goods this year.”

Retail sales in 2021

The COVID-19 pandemic continued to impact the retail landscape in 2021. The easing of public health measures and increasing vaccination rates allowed consumers greater access to retailers at various points throughout the year, resulting in a rebound of households’ retail spending. However, increased demand for consumer goods as the economy re-opened coincided with global supply chain constraints, impacting the price and availability of products sold at retailers across the country.

Canadian retailers finished 2021 with $674 billion in sales, up 11.6% from 2020 with increases observed in all subsectors. This increase comes in the wake of a decline in 2020, when retail sales experienced its largest drop since the 2009 global financial crisis. In volume terms, retail sales increased 8.4% in 2021.

Core Retail Sales

Core retail sales increased 7.7% in 2021, a faster pace than the 4.4% increase in 2020, largely due to the resumption of in-person shopping in the second half of 2021. The increase in core retail was led by an 8.6% gain at general merchandise stores, which were considered essential retailers during lockdowns.

Consumers continued to spend on home improvement projects as higher sales at building material and garden equipment and supplies dealers and that 14.1% increase contributed to the overall increase in retail trade. Record levels of sales in this subsector were recorded in March. This increase coincided with a surge in the price of lumber in the late winter and early spring of 2021. Higher sales of lumber, renovation materials and supplies continued to bolster sales in this subsector above their pre-pandemic levels throughout the summer months.

Retail e-commerce

Retail e-commerce increased 14.2% in 2021 as online shopping continued to be an attractive and accessible alternative to in-store shopping. Retail e-commerce sales accounted for 6.2% of total retail sales in 2021, up from a share of 6.1% in 2020.

Source: Globe and Mail
Source: The Star
Source: Statistics Canada