Retail Sales Rose 4.2% in June as COVID-19 Restrictions Eased, Statscan Says
Retail sales rose 4.2% to $56.2 billion in June as public health restrictions were eased in many parts of the country, Statistics Canada said on August 20. However, the agency said its preliminary estimate for July, which will be revised, suggests retail sales fell 1.7% in July.

TD Bank economist Ksenia Bushmeneva said retail sales continue to ebb and flow with the tightening and easing of the public health restrictions. “While consumers have been enjoying their newly found access to stores, they have also started shifting their spending patterns away from goods and toward services such as dining out, recreation and travel,” Bushmeneva wrote in a report.

“This transition likely weighed on retail sales in July, as indicated by the decline in the advance estimate. That said, improvement in spending on high-touch services, in addition to robust retail expenditure, bodes well for GDP growth in the third quarter.”

For June, retail sales increased in eight of the 11 subsectors as clothing and clothing accessories stores led the way with a gain of 49.1% following two months of declines.

  • Sales at general merchandise stores rose 7.4%
  • Motor vehicle and parts dealers gained 2.7%.
  • Sales at food and beverage stores fell 2.6%
  • Sales at supermarkets and other grocery stores dropped 3.5%
  • Sales at building material and garden equipment and supplies dealers fell 3.1%.
  • Core retail sales — which exclude gasoline stations and motor vehicle and parts dealers — rose 4.6%
  • Retail sales in volume terms rose 4.1% in June

Regionally, sales were up in six provinces in June, with Ontario gaining 9.8% on higher sales at clothing and clothing accessories stores and general merchandise stores.

On a seasonally adjusted basis, retail e-commerce sales fell 9.5% in June. On an unadjusted basis, retail e-commerce sales were up 6.3% year over year to $3.6 billion in June, accounting for 5.8% of total retail trade. With the increased ability to purchase non-essential items in store, the share of e-commerce sales out of total retail sales fell by 1.2% in June compared with May.

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

Canada’s Inflation Rate Jumps to 3.7% in July on Rising Housing Costs, Supply Chain Issues
The annual pace of inflation rose to 3.7% in July, Statistics Canada says, marking the biggest increase since May 2011 as price growth accelerated across much of the consumer price index and in all provinces. The year-over-year increase in the consumer price index compared with a 3.1% increase in June as more of parts of the economy reopened, giving consumers more opportunities to spend. Statistics Canada said part of the year-over-year rise is due to comparing prices to the lows seen one year ago.

Gasoline prices, for instance, rose by 30.9% compared with July 2020 when many businesses and services started to reopen after the first wave of COVID-19. Excluding gasoline, the consumer price index for July increased 2.8% compared with a year ago.

Prices for goods rose at an annual rate of 5% in July, accelerating from the 4.5% recorded in June. Car costs were up 5.5%, which the agency said was partially because of a global shortage of semiconductor chips. But other parts of the index were up because prices have increased at restaurants, for travel and tourism as companies pass on extra costs and respond to a surge in demand.

CIBC senior economist Royce Mendes said elevated inflation readings could stick around into next year with supply chain issues possibly persisting, and the Delta variant of COVID-19 posing a challenge to the economic reopening.

Food prices increased by 1.7% in July compared with July 2020, with Statistics Canada noting prices for food purchased at restaurants grew by 3.1%, the largest increase since January 2019.

However, the largest driver of overall price growth stemmed from the country’s housing market, as homeowner replacement costs rose 13.8% year-over-year, the largest increase since October 1987. According to a poll conducted last month by Abacus Data on behalf of the Broadbent Institute 83% of respondents said they worry at least a little about their cost of living. The online survey was conducted with 1,500 Canadians and is considered to have a margin of error of plus or minus 2.6 percentage points, 19 times out of 20.

Home transactions fell 3.5% in July, the fourth month of declines, the CREA reported. As well, prices for lumber and other wood products plummeted 23% in July after experiencing a more than 6% drop in June, according to Statistics Canada.

The headline reading for inflation marked the fourth straight month that the consumer price index registered a reading above 3%, which turned it into a political talking point on the federal campaign trail. Regionally, prices increases at a faster pace in July than June in all provinces, led by Prince Edward Island which registered a year-over-year increase of 6.1%.

The Bank of Canada has warned that inflation is likely to hover around 3% this year, above its two-per-cent comfort zone. “What we need to keep in mind is that this is not the type of inflation that the Bank of Canada is looking for, which would be driven by a fully healthy economy,” Mendes said in an interview. “There are still almost half a million people out of work that we need to get back to work before we can say that interest rates need to rise, or we need to pull back on stimulus in any meaningful way.”

Statistics Canada says the average of Canada’s three measures for core inflation, which are considered better gauges of underlying price pressures and closely tracked by the Bank of Canada, was 2.47% in July, up from the 2.27% recorded in June. The last time the average was as high as it was in July was in March 2009.

RBC economist Claire Fan said she expected a recovery in household demand, particularly for spending on services, to put a floor under inflation trends into next year even as temporary disruptions in price growth fade. Bank of Canada governor Tiff Macklem has said the central bank will act to cool inflation should temporary price pressures stick around and appear more permanent, which would include reducing its bond purchases or raising its key policy rate from 0.25%.

“The staying power of inflation will ultimately depend on expectations and the response of monetary policy,” TD senior economist James Marple wrote in a note. “The Bank of Canada may be willing to tolerate higher inflation while the economy is still re-opening and recovering from the health shock, but it will respond to more lasting price pressures by reducing monetary accommodation.”

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