Canadian retailers have started to recover from the third major COVID-19 shutdown, which stunted shopping earlier this year. Receipts fell 2.1% in May, when many provinces had restrictions on businesses to combat the virus, Statistics Canada reported. But retailers bounced back in June with sales rising 4.4% as rules eased, a preliminary estimate from the agency shows.
Even May’s number wasn’t as bad as the 3% drop that economists expected. The report provides further evidence that the third wave of the coronavirus, which slowed Canada’s growth for much of the second quarter, is now in the rear-view mirror.
“The good news is that provincial re-openings mostly began in June, with the positive impact on retail sales reflected in Statistics Canada’s preliminary estimate,” Rishi Sondhi, an economist at Toronto-Dominion Bank, said in a report to investors. “As capacity constraints on retailers have further loosened in July, another gain is likely in the cards.”
The sales weakness in May was broad-based, with 8 of the 11 categories posting declines led by building material, garden equipment and motor vehicles. Economists anticipate that as the reopening continues consumers will shift some spending to services –not captured in retail sales data — from goods as salons and restaurants reopen.
On a seasonally adjusted basis, retail e-commerce sales rose 2.1% in May. On an unadjusted basis, retail e-commerce sales were up 3.7% year over year to $4.2 billion in May, accounting for 7.0% of total retail trade. The share of e-commerce sales out of total retail sales was unchanged in May compared with April.
The June sales estimate is in line with positive employment numbers for the same month showing a gain of 230,700 jobs. Mobile-phone data also showed foot traffic in clothing retailers was up 44% in June from 2019 levels, suggesting Canadians are eager for in-person shopping.
With vaccination rates rising and now ahead of those in the U.S., economists predict the country will continue to post strong demand through the summer and fall. The easing of restrictions has Canadians enjoying activities that were forbidden for months, such as indoor dining and sporting events.