Canadian Shoppers Show Resiliency as Retail Sales Jump

Canadian retail sales rose 0.9% to $60.7 billion in April, Statistics Canada said as gains at general merchandise stores helped lift the overall sales. The agency also said its early estimate for retail sales in May suggested a gain of 1.6% for the month, but cautioned the figure would be revised.

TD Bank economist Ksenia Bushmeneva said retail sales remained robust in April, with core sales increasing for the fourth consecutive month. “Even higher prices did not deter consumers, with the volume of sales also rising on the month,” Bushmeneva wrote in a report.

“In the coming months, retail sales will be impacted by two major trends: rotation of consumer spending away from goods and toward services, and high inflation. We expect to see some continued moderation in retail sales volumes as spending on goods gives way to rebounding spending on services, such as concert tickets, vacations and dining out.”

Statistics Canada said that retail sales in April were up in six of the 11 subsectors tracked by the agency, representing 43.3% of retail trade.

Sales at general merchandise stores gained 4.2%, while sales at miscellaneous store retailers, which includes pet stores, cannabis stores, office supplies and stationery stores and pool retailers, rose 11.3%. Meanwhile, sales at building material and garden equipment and supplies dealers fell 4.3%.

April saw sales at gasoline stations gain 3.0%, while sales fell 0.3% at motor vehicle and parts dealers. Sales at new car dealers dropped 0.8%, while used car dealers gained 1.7%, the first increase in six months.

Core retail sales — which exclude gasoline stations and motor vehicle and parts dealers — rose 1.0%. In volume terms, overall retail sales gained 0.9% in April.

As for eCommerce sales, on a seasonally adjusted basis they were up 0.9% in April. On an unadjusted basis, retail e-commerce sales were down 21.0% year over year to $3.3 billion in April, accounting for 5.2% of total retail trade. The share of e-commerce sales out of total retail sales fell 2.0% compared with April 2021.

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

U.S. Retail Sales in May Slip 0.3% Amid Surging Inflation

Americans trimmed their spending unexpectedly in May compared with April, underscoring how surging inflation on daily necessities like gas is causing them to be more cautious about buying discretionary items. U.S. retail sales slipped 0.3%, down from a revised 0.7% increase in April, the Commerce Department reported.

A sharp decline in auto sales, largely because of higher prices and shortages of new car inventories, depressed the retail sales figure. Excluding autos, retail sales actually rose 0.5% in May. But excluding sales from gas stations, retail sales slipped 0.7%, showing how higher prices at the pump are accounting for more of shoppers’ overall spending.

The report also highlighted shoppers’ pullback on some of the products that were in hot demand during the height of the pandemic but are now falling out of favour. Sales fell roughly 1% for furniture and home furnishings stores and electronic and appliance retailers. Building and garden supply stores, as well as general merchandise retailers, are also showing signs of a sales slowdown.

Sales online fell 1%, as shoppers go back to physical stores. Meanwhile, sales at food stores rose 1.2% due to higher prices. Business at restaurants was up 0.7%. However, the retail report covers only about a third of overall consumer spending and doesn’t include services such as haircuts, hotel stays and plane tickets.

The snapshot comes as Americans have been providing critical support to the economy even after a year of seeing prices spiral higher for gas, food, rent, and other necessities. And signs of recession risks are rising. Inflation is at a 40-year high. Stock prices are sinking. The economy actually shrank in the first three months of 2022. And the Federal Reserve is making borrowing much costlier.

Among the biggest worries is surging inflation, which has become more widespread and more persistent than expected. Consumer prices rose 8.6% in May from a year earlier, the biggest annual 12-month jump since 1981. Helping to fuel the surge were much higher prices for everything from airline tickets to restaurant meals to new and used cars.

Meanwhile, the national average price at the pump reached $5.01 per gallon on June 21, up from $4.45 a month ago, and surging more than 60% in one year.

Russia’s invasion of Ukraine has worsened global food and energy prices. Extreme lockdowns in China over COVID-19 worsened supply shortages.

On June 22, the Fed raised its benchmark interest rate by three-quarters of a percentage point. That marks the Fed’s largest rate hike since 1994, and it signalled more large rate increases to come that would raise the risk of another recession.

Cleary, retailers, both big and small, are noticing customers changing their habits in recent months. In May, major retailers like Target reported a faster-than-expected shift away from couches and casual wear that were in hot demand during the height of the pandemic to more pre-pandemic routines. They’re also seeing shoppers become more focused on basics and trade down to cheaper products as they juggle higher daily costs. Target said earlier in June that it was canceling orders on items like sofas and marking down mounds of unwanted inventory while raising prices elsewhere to offset higher costs.

Melissa Baker, founding partner at Fenwick Brands, a Birmingham, Alabama-based venture firm that focuses on consumer brands, cites new behaviours as gas at the pump keeps climbing higher. At $4 per gallon, shoppers traded down to cheaper brands, for example. But as gas hit $5 per gallon, she is seeing they’re also changing their behaviour before they venture out, by limiting their shopping trips to save on gas.

Source: Globe and Mail