• Canadian retail sales edged up a modest 0.3% in February (m/m), following an upwardly revised 0.6% gain in January (previously reported as +0.4%).
  • Netting out price changes, the picture was still modest, with retail trade volumes up 0.2% on the month.
  • Retail sales were only up in 6 of the 11 major categories. The uptick was driven primarily by stronger sales at motor vehicles and parts dealers (+1.1%) and general merchandise stores (+1.4%). Sales at gasoline stations were also up 0.6%. Providing some offset were lower sales at food and beverage stores (-1%). Excluding the volatile autos and gasoline categories, core retail sales were down 0.1%.
  • Regionally, sales were up in five of the 10 provinces. Ontario (+0.7%) and British Columbia (+1.2%) led the overall increase. Quebec (-0.4%) and Alberta (-0.4%) provided the most offset.
  • In a similar fashion to February’s manufacturing and wholesale trade releases, Statistics Canada included a special section the impacts of rail blockades and COVID-19 (preliminary) on retail sales in February:
    • Impacts were reported as relatively insignificant for the month of February, which isn’t surprising given that most COVID-19 measures started to come into effect in March.
    • 12% of retailers reported a negative impact on sales from both COVID-19 and the rail blockades, whereas 1.6% of retailers cited higher sales as a result of these events.
    • The largest estimated impacts were on motor vehicles and parts dealers (-$171 million), gasoline stations (-$93 million), and miscellaneous stores (-$68 million).

Key Implications

  • In a pre-COVID-19 world this release would have been viewed as cautiously optimistic given the strong upward revisions to the prior months and the positive four-month run in nominal and real retail sales growth. Since March, necessary social distancing efforts to contain COVID-19 are expected to have dealt an unprecedent blow to the sector, with many provinces adding a range of retail categories to their non-essential businesses lists. But it’s not just the sudden-stop in activity – the unprecedented deterioration in labour markets in March (with more expected to come) is likely weighing heavily on consumer sentiment and spending.
  • Looking ahead, we expect a significant change in consumer spending patterns, with only food and beverage stores expected to record meaningful gains. On that note, Statistics Canada mentioned non-food retailing as one of the hard-hit sectors in their flash GDP estimate for March.
  • Prompt household income support from the government will provide some respite to those most impacted by COVID-19. Looking ahead, pent-up demand may also be supportive for the sector once measures are eased. However, we also expect that some consumers will turn more cautious amid the unprecedented layoffs and notably weak macroeconomic backdrop, in turn reducing their discretionary spending in favour of savings.

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