The 10% m/m slump in March retail sales appears to have been followed by a fall of 15% in April, taking the total drop since February to 24%. The better news is that sales seem to be rebounding in May.
Sales slumped again in April, but should rise in May
- The 10% m/m slump in March retail sales appears to have been followed by a fall of 15% in April, taking the total drop since February to 24%. The better news is that sales seem to be rebounding in May.
- The 10% drop mainly reflected a 36% m/m plunge in auto sales. Non-auto sales fell by just 0.4%. That was mainly because a 23% surge in food sales helped to offset large falls elsewhere, including a 51% slump in clothing sales. Electronics & appliance sales rose by a modest 0.8%. (See Chart 1.) As the 20% drop in gasoline sales partly reflected lower prices, retail sales volumes fell by a slightly lesser 8.2%.
- E-commerce sales, which are included in the overall figure, rose by 16.3% m/m. The true figure may have been much larger, and therefore the actual change in non-auto sales positive, because the range of online retailers covered is not as broad as in some countries. Most notably, Amazon’s sales are not included. That said, unlike in the US, Canada’s figures do not include restaurant sales either, which clearly tumbled.
- Stats Can provided an advance estimate of April sales, which showed an even larger 15.6% m/m decline. That would take the total fall since February to 24%. More encouragingly, weekly credit and debit card spending data suggest that most of that decline occurred in the first half of the month and sales started picking up from the middle of April. Even if card spending was simply unchanged at its end-April level throughout this month, retail sales might have rebounded by 10% in May. As stores in most provinces are now allowed to re-open (albeit with some continued restrictions), we suspect sales will do better than that.
- Nevertheless, retail sales are unlikely to return to their pre-virus levels any time soon. Consumer confidence remains near record lows and, even with government support, the surge in unemployment means household income appears to have slumped by 20%. (See here.) While many more fortunate people have been able to save money while businesses have been closed, uncertainty about the outlook suggests that they will be in no rush to go out and spend those extra savings. (See here.)
Chart 1: Retail Sales (% m/m)
Table: Retail Sales
Ex. Autos & Gasoline
Ex. Food & Gasoline
Stephen Brown, Senior Canada Economist, firstname.lastname@example.org