November 20, 2020 | 08:59
Canadian Retail Sales (Sep. 2020) — Solid September
Canadian retail sales rose 1.1% in September, handily beating expectations and Statcan's preliminary estimate of a small increase. That put the dollar value of sales up 4.6% y/y and 3.1% above pre-COVID/February levels. The gains were broad-based, with furniture/home furnishings (+4.5%) leading the way—booming home sales are clearly providing an assist there. There were also strong gains in general merchandisers, auto sales and electronics/appliances. The only sectors to see a decline were sporting goods (-1.6%) and clothing. From year-ago levels, there are also only two sectors that are down—gasoline (-12.8%), no surprise there given how much prices have fallen; and, clothing (-12.5%) which are likely suffering from a lack of foot traffic and fewer needs with many working from home (believe it or not, I'm not wearing a suit and tie every day at home). Excluding autos, sales rose 1%, and were up 1.1% ex. autos & gas.
Statcan's early estimate for October retail sales is for a flat reading. Given the increasing COVID-driven regional restrictions in recent weeks, November and December could see some weakness.
Retail volumes climbed 1.1%, leaving them up 4.3% y/y and 3.7% above pre-COVID/February levels. That's certainly impressive, but keep in mind that plenty of dollars that would regularly be spent on services are being redirected to goods since many services are unavailable. The strong gain in volumes keeps monthly GDP on track to come in around Statcan's estimate of +0.7%, which keeps Q3 GDP on pace for about a 47% annualized rebound.
Regionally, most provinces were higher with Nova Scotia and Saskatchewan the exceptions. New Brunswick led the way with a 3.8% surge, while Alberta (+2.5%) and B.C. (+1.7%) saw good gains as well. Sales in every province are sitting above year-ago levels.
Key Takeaway: Retail sales remain a leader in the recovery, but unfortunately they don't tell the whole picture for the economy. However, with COVID cases rising and restrictions tightening in a number of regions, we're likely to see a period of softness in retail activity, though it may not show up until November.