Canadian retail sales fell for a second consecutive month in January as many non-essential retailers were forced to restrict in-person shopping due to the pandemic, but early indications point to a rebound in February as the restrictions eased. On March 19, Statistics Canada said that retail sales fell 1.1% to $52.5 billion for the first month of the year, however its preliminary February estimate pointed to a gain of 4.0% for the month.

“The recovery in February retail sales adds to the evidence suggesting that GDP growth continued into the second month of the year,” CIBC senior economist Royce Mendes wrote in a report suggesting the bank’s forecast for the first quarter might have been too conservative. “That being said, the risks to the economy from the third wave of the virus are now greater than they were at the time those forecasts were made. As a result, the second quarter might begin on weaker footing than previously envisioned.”

Recent economic data has suggested a stronger-than-expected start to the year. Statistics Canada reported that the economy added 259,000 jobs in February, outpacing the net gain of 75,000 jobs that had been expected and the Bank of Canada said earlier in March that it now expects the economy to grow in the first quarter compared with its earlier expectation that there would be a contraction to start the year.

TD Bank economist Ksenia Bushmeneva said credit and debit card data show spending staged a solid rebound as provinces began to gradually lift restrictions last month. “All in all, the Canadian economy has shown relative resilience in the face of the second wave of the pandemic, and the recent economic reopening ushers optimism about the days ahead,” Bushmeneva wrote. “That being said, the slow pace of vaccination-to-date and the recent uptick in cases continue to pose uncertainty to consumers and businesses alike about what the next few months could hold.”

The drop in January retail sales came as core retail sales – which exclude gas stations and motor vehicle and parts dealers – fell 1.4%. Furniture and home furnishings stores lost 15.1%. Sales at general merchandise stores—many of which are considered essential—increased by 3.3% in January after falling in December. Building material and garden equipment and supplies dealers also increased by 2.9% in January, following a decrease in December.

On an unadjusted basis, retail e-commerce sales were up 110.7% year-over-year to $3.5 billion in January, accounting for 7.8% of total retail trade. The continued rise in e-commerce sales coincided with an increase in store closures in January. On a seasonally adjusted basis, retail e-commerce rose 15.0% in January.

In volume terms, overall retail sales fell 1.6% in January.

Source: Global News
Source: Statistics Canada