Canada Retail Sales Recovery in May/June, a Ray of Hope

Retail sales in Canada jumped sharply in May, and Statistics Canada preliminary data points to another strong month in June

Retail sales rose sharply 18.7% in May as more brick-and-mortar stores opened as cases of the virus declined across Canada and consumer confidence rose from April lows. Statistics Canada noted that 23% of retailers remained closed in May, up from one-third in April. The rebound was widespread in almost all subcategories, although it was driven by car and parts sales.

Early industry reports showed car sales continued into June. Sales of food and drinks (from stores) were down from April but remained 11.6% higher than a year ago as the pandemic kept visitors at home.

Increased demand for online shopping pushed e-commerce sales to more than 8% of total retail sales, up from 3% a year earlier. Total e-commerce sales in May remained flat, up 112.7% year-on-year, and this excludes sales made by foreign retailers.

The rebound was not large enough to bring activity back to pre-COVID levels. Excluding price impact, sales declined by almost a third in March and April and were still 18% below their February level in May. But Statistics Canada also released a preliminary estimate that (nominal) sales rose another 24.5% in June.

Ray of Hope for Canada’s Economy
With household spending accounting for more than half of the Canadian economy, it is great to see a sharp rebound in retail sales. The data continues to show that Canada avoided the worst-case scenario in the first half of 2020 and has tracked some of the most positive outlooks with swift and aggressive government aid.

“Government restrictions will be in place for a long period in one form or another, which means that the economy cannot fully recover. If government revenue support starts to decline, the pace of recovery could slow as the true impact of higher unemployment begins to be felt. ”

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