OTTAWA – By almost equal measure, Canada’s retail sector continues to be both good and not-so-good in recent months. Now, it seems shoppers have returned in a good mood.
But for how long?
Consumers rebooted their spending at the start of 2016, creating for that 2.1-per-cent loss in retail purchases in December with a matching increase in buying during January – an optimistic sign that shoppers are assisting to get the financial state on the right track for what might be healthy first-quarter growth.
In fact, the two.1-per-cent overall rebound in January retail sales marked the single-strongest growth pace since March 2010, if this reached 2.6 percent – surprising considering that most economists had forecast a gain of just 0.6 per cent for the month.
The biggest retail gains in January came in the car sector, where vehicle and parts dealers saw a 4.8-per-cent jump in sales – a turnaround from a 3.1-per-cent decline in December, but still managing increases in three of history 4 months, according to a Statistics Canada report released Friday.
“Traditionally, the winter months are challenging months which to base predictions for the whole year,” said Michael Hatch, chief economist at the Canadian Automobile Dealers Association.
“They are generally months where sales are not so great, just because people tend to wait out until the spring to make their purchase decisions. However with that said, we’re very encouraged by the results we saw in January and February,” Hatch added.
“They indicate a number of fundamentals that have been driving sales for several years. Chief included in this is record strong affordability -the average price that people are paying for new vehicles vis–vis their average income (which) is better than it’s been in a generation.”
Other sectors also seem to be benefiting from early indications of improving economic growth this year, along with the willingness of Canadians to invest more.
Related
- Canada’s inflation slows to 1.4% in February on lower gas prices
-
-
-
The Statistics Canada report showed sales were up 4.8 percent in January at stores selling general items – again, that was a turnaround from the drop of 3.4 per cent in the previous month.
At the same time, sales at outlets focusing on building materials and garden equipment increased by three per cent from the marginal gain of 0.3 per cent in December. Purchases of health insurance and personal-care items bounced back from the 2.7-per-cent decline to achieve of three.5 per cent in January.
The January retail picture is really a positive sign for that economy.
“Along with the earlier reported begin manufacturing volumes (the retail report) leaves our tracking of economy-wide January GDP growth at 0.3 percent, despite ongoing weakness within the gas and oil sector,” RBC senior economist Nathan Janzen said in a note to clients.
That increase, he said, “bodes well” for 2.2-per-cent growth in the first quarter of 2016, although some other economists see Q1 growth coming in nearer to two percent – but those forecast will probably alternation in the approaching days, with lots of analysts waiting to see details of the Liberal government’s stimulus plan that’ll be found in Tuesday’s federal budget.
There can also be uncertainty over where global oil prices – which collapsed at least a year ago and pulled Canada into a recession during the first 1 / 2 of 2015 – will be exchanging the months ahead.
Meanwhile, another report Friday from Statistics Canada showed the nation’s inflation rate slowed in February to at least one.4 per cent on a year-over-year basis, led lower by cheaper gasoline price and down from an annual pace of two percent in January.
Most analysts had expected the customer price index to exhibit an inflation rate of just one.5 per cent in February.
Overall, “a solid retail sales report points to slightly firmer Canadian growth in Q1,” economists at BMO Capital Markets, said in a note to investors.
“At the same time, inflation looks to remain tucked comfortably below two percent.”
But some economists are quick to caution that January’s rebound within the retail sector may not lead a longer-term trend.
“It will be difficult to maintain the current blistering pace retail sales with no turn for that better within the labour market,’ noted CIBC World Markets economist Nick Exarhos.
Financial Post
gisfeld@nationalpost.com
Twitter.com/gisfeld
