Canadian Retail Sales Surged 18.7% in May After Record Decline

Retail sales are on pace to recover from the COVID-19 shutdowns after surging nearly 19% in May with even larger gains expected in June, says Statistics Canada. The agency says retail sales increased to $41.8 billion in May after steep declines in the previous two months, still leaving them 20% below levels in February, before physical distancing measures were implemented to fight COVID-19.

Economists on average had expected an increase in May of 20%, according to financial markets data firm Refinitiv. Excluding the automotive sector, sales increased 10.6%.

The results showed there’s a lot of pent-up demand in the economy, said Dawn Desjardins, deputy chief economist for the Royal Bank of Canada. StatCan said about 23% of retailers were closed during May, with the average shutdown lasting five business days.

Sales activity is about 80% recovered from two months of sharp declines including 24.1% in April, with StatCan suggesting another 24.5% increase for June. “That will put it really back in line with where it was in June 2019, so moving up to the positive side from a very deep decline that we saw in April.”

Sales were up in 10 out of 11 subsectors with vehicle and parts dealers, general merchandise stores and clothing stores the main contributors to May’s strength. Food and beverage stores were the only subsector to decrease, losing 2% as supermarket sales fell 4.2% and beer, wine and liquor store sales were down 1.2%.

While auto sales crashed in the couple of months after the COVID lockdowns, a survey by CarGurus suggests the delayed sales aren’t lost as shoppers. Some 86% of respondents say they delayed their purchases but more than two-thirds are actively researching and only 6% have parked their plans indefinitely. 

All provinces and territories contributed to the sales increase but the recovery was strongest in Quebec where sales grew 33.3%, followed by Newfoundland and Labrador at 25.5% and Manitoba at 24%. Ontario sales were the largest at $14.3 billion, up 14.2% following a 30.9% decrease in April.

Toronto-Dominion Bank economist Ksenia Bushmeneva noted that even as sales bounce back to close to their precrisis levels, “the pandemic wreaked havoc on the retail landscape, reshaping the industry and dramatically accelerating trends that were already in place for some time, such as the shift to online shopping.” Statistics Canada says online sales were $3.8 billion in May, accounting for 8% of the total retail market. Retail e-commerce sales increased 112.7% from a year earlier.

Spending activity was supported by job creation in May and income support programs from government, said Desjardins. But it’s been a significant strain on some companies that have been forced to seek creditor protection as consumers held back spending which accounts for more than half of the economic output.

“It’s very important that the consumer continues to spend. As we go forward that rapid pace of recovery that we’re seeing, there’s chances that that won’t be sustained and the reason will be because we are opening up the economy but some jobs won’t be coming back in the near term, simply because of the physical distancing rules that have to remain in place.”

Desjardins also said that the tapering off of income support programs and easing up of payment deferrals may prompt a change in consumer behaviour. “Consumers may be a little more cautious, so we probably won’t see this huge spurt in activity being sustained as we go through the latter part of this year.”

Source: Globe & Mail
Source: Toronto Star

U.S. Retail Sales Surge Higher in June To Pre-Pandemic Levels

U.S. retail sales exceeded forecasts in June for a second straight month as more businesses reopened and expanded jobless benefits padded the wallets of the unemployed. The value of retail purchases increased 7.5% from the prior month after an upwardly revised record 18.2% surge in May, according to Commerce Department data on July 16. The median estimate in a Bloomberg survey of economists called for a 5% gain for June.

As states restarted their economies and millions of Americans headed back to work, consumers opened up their pocketbooks more freely. The pickup in June brought the value of retail sales about in line with pre-pandemic levels, supporting businesses and overall economic growth.

Nonetheless, demand risks remain, most notably a resurgence in virus cases that has led states to pause or even backpedal reopening plans. Data from the Labor Department on July 16 showed first-time applications for unemployment insurance last week were higher than projected and remain about double the peak in the previous recession.

The figures “confirmed the strong snapback in demand as retail sales are now back to their pre-coronavirus levels,” Oxford Economics’ Lydia Boussour and Gregory Daco wrote in a note. “But while [July 16th’s] report gives the illusion of a fearless consumer spending lavishly, the reality is more sobering: consumers are increasingly fearful amid new spikes in Covid-19 cases and a looming fiscal cliff.” Equity futures fell, the dollar remained higher and the yield on the 10-year Treasury note eased as investors parsed th spending and labor data.

The retail sales report showed 10 of 13 major categories increased, reflecting solid gains in furniture, electronics and appliances, clothing and sporting goods. Purchases at apparel shops jumped 105.1%, while electronics and appliances outlets saw a 37.4% gain.

With more restaurants and bars having opened to dine-in customers, receipts climbed 20% in June after a 31.5% advance a month earlier. At the same time, sales at grocery stores decreased 1.6%.

However, some backpedaling in states affected by a pickup in virus cases will inevitably spur another wave of layoffs as recently opened businesses must again close their doors. During the week of July 13, California, the nation’s most populous state, ordered all inside dining and other indoor entertainment closed. Job openings across all 50 states have declined over the past two weeks, according to jobs-website Glassdoor Inc.

Also, the one-time stimulus checks and the extra $600 in weekly unemployment benefits that have effectively cushioned incomes amid widespread layoffs are running dry. With many of the checks spent and the $600 federal top-up expiring at the end of July, consumers are likely to pull back on discretionary spending without additional government support.

Purchases at auto and parts dealers also posted a robust gain of 8.2%. Excluding automobiles, retail sales rose 7.3%. The sales data don’t capture all household purchases, so personal-spending figures that include outlays for all services will offer a fuller picture on July 31.

Source: Bloomberg
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