Canadian Retail Trade Data, June 2020

Retail sales were up 23.7% in June to $53.0 billion. After three months of sales below pre-pandemic levels, retail sales in June were 1.3% higher than February levels as more regions moved ahead with plans to reopen their economies. Sales were up in all subsectors, with growth primarily led by motor vehicle and parts dealers, as well as clothing and clothing accessories stores. Rounding out the second quarter, retail sales were down 13.3% compared with the first quarter. In volume terms, quarterly retail sales were down 12.4%. Retail sales in volume terms were up 22.9% in June.

Based on respondent feedback, approximately 9% of retailers were closed during June. The average length of shutdown was one business day. Despite these challenging times, most respondents reported their sales figures and Statistics Canada thanks them for their continued collaboration.

Given the rapidly-evolving economic situation, Statistics Canada is providing an advance estimate of July sales. Early estimates suggest that retail sales increased by 0.7% in July. Owing to its preliminary nature, this figure should be expected to be revised.

Widespread growth as more regions reopen

Retail sales were up across all subsectors in June. The motor vehicle and parts dealers subsector (+53.4%) contributed the most to the sales increase, largely the result of pent-up demand following dealership closures during the spring months.

Supporting growth in this subsector were new car dealers. According to the New Motor Vehicle Sales Survey, the value of new motor vehicle sales in June was down 19.1% year over year. However, in unadjusted terms, the value of new motor vehicle sales increased 17.8% compared with their pre-pandemic levels in February 2020. 

Sales at gasoline stations were up 26.3%, while sales in volume terms at gasoline stations rose 19.9%. Higher gasoline prices contributed to the gain in June, reflecting growing demand due to the gradual reopening of businesses and increased local travel. Crude oil prices were also up in June, as more economies around the world began or continued to reopen.

In other subsectors, sales were up at health and personal care stores (+11.7%), general merchandise stores (+8.6%), electronics and appliance stores (+4.4%), as well as food and beverage stores (+1.5%).

Sales surge at non-essential retailers

On the heels of double-digit growth in May, clothing and clothing accessories stores posted a 142.3% gain in June, as many regional economies implemented the later stages of their reopening plans, allowing more brick-and-mortar stores to open, including those in malls. While sales in this subsector increased in June, they remained below their February levels.

Sales rebounded at several other retailers that had been deemed non-essential at the start of the pandemic. Furniture and home furnishing stores (+70.9%), building material and garden equipment and supplies dealers (+13.0%), as well as sporting goods, hobby, book and music stores (+64.9%) all posted sales that exceeded their February levels.

Sales up in every province

Sales were up in every province in June. Eight provinces rebounded to their pre-pandemic February levels. In Ontario, sales increased 33.8%—the province’s largest gain on record. In the census metropolitan area (CMA) of Toronto, sales rose 34.8% Sales were up 23.5% in Quebec, with the CMA of Montréal (+35.8%) posting the largest increase.

E-commerce sales in Canada

On an unadjusted basis, retail e-commerce sales were $3.2 billion in June, accounting for 5.5% of total retail trade. E-commerce sales in June made up a smaller share of retail sales than in April and May, as more non-essential retailers opened their brick-and-mortar stores. However, the proportion of e-commerce out of total retail sales still remained above the pre-pandemic share observed in February. On a year-over-year basis, retail e-commerce increased 70.6%, while total unadjusted retail sales increased 3.0%. When adjusted for basic seasonal effects, retail e-commerce decreased 13.0% in June.

Source: Statistis Canada

U.S. Retail Sales Slow in July; Obstacles Mount for Nascent Economic Recovery

U.S. retail sales increased less than expected in July as consumers cut back on purchases of motor vehicles, and could slow further in the months ahead amid spiralling new COVID-19 infections and a reduction in unemployment benefit checks. Despite the moderation in retail sales reported by the Commerce Department on August 14, sales have recouped losses suffered when businesses were shuttered to slow the spread of the coronavirus. The third straight monthly gain lifted retail sales to their highest level since the government started tracking the series in 1992. It supported the view that consumer spending would rebound this quarter after a record collapse in the second quarter.

Economists attributed the increase in retail sales over the past three months to a $600 weekly unemployment benefits supplement from the government, which amounted to almost $75 billion in July. The supplement ended on July 31, leaving economists to expect a decline in retail sales in August.

“It looks like the skies are darkening once again as the second-wave shutdowns clamp down harder on economic activity and the federal government stops sending $600 weekly checks to the unemployed,” said Chris Rupkey, chief economist at MUFG in New York. “The pandemic isn’t over yet and the recession won’t be either if Congress and the president can’t come to an agreement on how to best support the nascent recovery in a hurry.”

Retail sales rose 1.2% in July after advancing 8.4% in June. Economists polled by Reuters had forecast sales would rise 1.9% in July. Sales increased 2.7% from a year ago in July.

On August 8, President Donald Trump signed a number of executive orders, including one that extended the supplement, though he reduced the weekly payout to $400. States are required to cover $100 of the benefits under the order, but they are under immense financial pressure due to the pandemic. The remaining $300 will be funded from a limited emergency disaster relief program, which economists estimated could be depleted as early as September.

Signs mount that economic activity is stalling as coronavirus infections continue to spread across the United States. Job growth slowed in July. About 28.3 million people are on unemployment benefits. The slowdown in retail sales in July was led by a 1.2% decline in receipts at auto dealerships. That followed a 6.1% acceleration in June. Consumers also cut back spending at hobby, musical instrument and book stores as well as at building materials outlets.

Steady Sentiment

Purchases at electronics and appliance stores soared 22.9% in July , likely reflecting strong demand as many Americans work from home. Receipts at restaurants and bars increased 5.0%, though the pace slowed from the 26.7% notched in June. Online and mail-order retail sales rebounded 0.7%. Furniture store sales were flat. Receipts at clothing stores increased 5.7%.

Excluding automobiles, gasoline, building materials and food services, retail sales increased 1.4% in July after soaring 6.0% in June. These so-called core retail sales correspond most closely with the consumer spending component of the gross domestic product report.

Consumer spending collapsed at a 34.6% annualized pace in the second quarter. That led GDP to plunge at a 32.9% rate last quarter, the deepest decline in output since the government started keeping records in 1947. A separate report from the University of Michigan on August 14 showed consumer sentiment steady in mid-August, though consumers anticipated “bad economic times to persist not only in the year ahead” and many “expect no return to a period of uninterrupted growth over the next five years.”

“Providing further assistance to struggling households will be essential to keeping growth momentum from faltering,” said Lydia Boussour, a senior U.S. economist at Oxford Economics in New York. “This is even more critical as recent research have highlighted that low-income families have played a central role in driving the initial phase of the recovery in consumption.”

Though motor vehicle sales fell in July, manufacturers continued to ramp up production, boosting output at the nation’s factories, a third report from the Federal Reserve showed. Manufacturing production rose 3.4% in July after surging 7.4% in June. Still, the third straight monthly gain left factory output about 8% below its level in February.

“Excess capacity throughout the economy will weigh on production of investment goods,” said Gus Faucher, chief economist at PNC Financial in Pittsburg. “The biggest downside risk is a failure of Congress and the Trump administration to agree on a fiscal stimulus package that would support consumer demand during a period of very high unemployment.”

Source: Reuters