July 23, 2021 | 09:02
Canadian Retail Sales (May) — Another Drop But Summer Looking Brighter
Canadian retail sales fell 2.1% in May, more than 1 ppt better than the flash estimate. April was also revised a tick higher, though that still left the two-month drop at 7.5%, as the third wave weighed heavily on activity. The May decline was almost across the board, with big losses in building materials (-11.3%), clothing (-11.2%) and furniture (-8.7%). Autos were down 2.4%, leaving sales excluding autos down 2%. The only sectors recording gains were electronics/appliances (+1.5%), gas stations (+0.9%, with higher prices playing a big role) and food/beverages (+0.8%).
Statcan's early estimate for June retail sales is for snappy 4.4% rebound, as third wave restrictions were starting to ease. It should be no surprise that activity picked up as stores were able to open. Expect July to show another solid increase as case counts continued to drop and restrictions were eased further. Back to May, the regional picture showed 8 of 10 provinces reporting declines, with Nova Scotia (-12.5%), PEI (-2.9%) and Newfoundland and Labrador (-2.7%) hit hardest. Ontario sales were only down 2.1%, despite a generally slower re-opening than other parts of the country.
Retail volumes fell 2.7% in May, as prices rose in the month. With manufacturing and wholesale figures already in hand, it looks as though May GDP will come in close to Statscan's -0.3% estimate, with risks tilted to the downside.
In a separate release, the flash estimate for June wholesale trade clocked in at -2%, with Statscan noting that was "largely due to lower sales in the building material and supplies and the machinery, equipment and supplies subsectors". The steep drop in lumber prices could be playing a role here, suggesting that volumes might look a bit firmer.
Key Takeaway: The third wave hit retail sales hard, but the early indications are that Canadian consumers were champing at the bit to get back to the mall with a solid rebound in June activity. Look for sales to continue to climb through the summer months.