In recent months, retail sales and consumer sentiment have shown fluctuations with mixed indications.
March Decline in Retail Sales
A May 2024 Edge Realty Analytics report indicated that retail sales in Canada experienced a notable decline in March, falling by 0.2% month-over-month (m/m). This decrease, slightly worse than the anticipated 0.1% drop, marks the fourth time in the past five months that retail sales have dipped, signalling ongoing challenges in the consumer market.
When excluding the more volatile components such as gasoline and automobiles, the decline is more significant. Core retail sales, which strip out these sectors, saw a more pronounced decline of 0.6% m/m. This represents the steepest drop since June of the previous year. The decline was broad-based, hitting several key retail sectors hard:
Furniture and Electronics Stores
Sales in this category fell by 1.6% m/m, indicating reduced consumer interest in big-ticket home goods and electronics.
Clothing and Accessories
This segment also dropped by 1.6% m/m, reflecting weaker demand for apparel and related items.
Sporting Goods and Hobby Stores
These stores saw a similar 1.6% m/m decline, suggesting that consumers are cutting back on discretionary spending in these areas.
Source: Edge Realty Analytics
Per Capita Sales Decline
Considering Canada’s growing population, the decline in retail sales per capita is particularly concerning. In March, per capita retail sales fell by 0.5% m/m, bringing them back to levels last seen in late 2021. This shows that consumer spending is not keeping pace with population growth, suggesting broader economic pressures on households.
Source: Edge Realty Analytics
April and May Retail Sales Volatility
A more recent, June 2024 Edge Realty Analytics report found that retail sales rebounded in April, rising by 0.7% m/m, aligning with market expectations. However, this recovery was short-lived, as preliminary estimates for May suggested a 0.6% m/m decline. The volatility in these months reflects fluctuating consumer spending patterns. April saw notable increases in beer and wine sales, which surged by 5.5%, and cannabis sales, up by 3.5%. These two categories alone contributed significantly to the overall increase in retail spending for the month.
On the downside, vehicle sales experienced a significant drop, falling by 2.2% month-over-month. Additionally, sales at building material stores saw a sharp decrease of 1.4%, marking the steepest decline since February 2023.
Source: Edge Realty Analytics
When adjusted for population growth, the per capita sales figures continue to decline, currently trending down at an annual rate of -2% year-over-year.
Consumer Confidence Rebounds in June
Despite the mixed signals from retail sales, consumer confidence showed signs of improvement in June, although still at depressed levels. Following a rate cut by the Bank of Canada, the headline index of consumer sentiment rose by 4.7 points, marking the strongest increase since February. The Conference Board of Canada reported slight improvements in a couple of key areas
Current Finances
The percentage of consumers feeling better about their current financial situation increased from 10.9% to 12.2%.
Major Purchases
The proportion of consumers who believed it was a good time to make major purchases increased from 10.0% to 12.2%, while those who thought it was a bad time fell from 64.8% to 62.8%.
This uptick in consumer sentiment, particularly regarding major purchases, is promising for sectors such as real estate which relies heavily on consumer confidence.
