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Canada: Retail Sales Post a Moderate Decline in February

Retail sales fell by 0.2% month-on-month (m/m) in February – a shallower decline than 0.6% loss reported by the Statistics Canada’s advanced estimate. January’s print remained unrevised at a 1.4% gain.

Adjusting for the impact of inflation, the decline in volume of sales was even more pronounced at 0.7% m/m.

The decline in today’s headline reading was largely driven by receipts at gasoline stations, which lost 5.0% m/m due to prices at the pump. In volume terms, sales at gasoline stations decreased 4.9% m/m – reversing three months of gains .

Offsetting some of these losses, sales at motor vehicle and parts dealers rose for the seventh month in a row, up 0.9% m/m. That is a step down from a 3.0% gain in January.

Excluding sales of autos and gasoline, core retail sales were 0.1% m/m higher in February.

  • The gain in core sales was led by higher sales at clothing & accessories stores (+4.4% m/m), followed by strong performance at health & personal care (+1.1% m/m) and furniture & home furnishings stores (+1.1 % m/m). Sales at electronics and appliance stores (+1.3% m/m) and building material, garden equipment & supplies dealers (+0.2% m/m) were also positive.
  • Meanwhile, miscellaneous store retailers (-2.3% m/m), general merchandise retailers (-1.6% m/m), food and beverage stores (-0.2% m/m) and sporting goods, hobby items, musical instruments and books stores (-0.2% m/m) were the biggest underperformers.
  • E-commerce sales, which are not included in the headline tally, were up a whopping 7.8% on the month in February.
  • Statistics Canada’s advanced estimate for March indicates a 1.4% m/m decline. In contrast, our internal card spending data (which excludes auto sales and tilts toward housing-related categories) points to a moderate increase in retail sales.

Key Implications

The decline in retail sales has been expected as the boost from one-time government transfers, such as daycare subsidies and several one-off provincial inflation relief programs, continues to wane. One category that stands out is auto sales, which have been supported by relatively strong pent-up demand. But even here, growth is slowing as higher borrowing costs worsen affordability, especially as mortgage costs continue to creep higher.

Looking one month ahead, Statistics Canada expects a more pronounced decline in retail trade in March. The recent Survey of Consumer Expectations for the first quarter of 2023 suggests that consumers are expecting to spend less on discretionary items. That said, our internal high-frequency data points to a moderate gain in total spending in March and that puts our tracking for consumer spending slightly above 4% (annualized) in Q1 2023.

TD Bank Financial Group
TD Bank Financial Group
The information contained in this report has been prepared for the information of our customers by TD Bank Financial Group. The information has been drawn from sources believed to be reliable, but the accuracy or completeness of the information is not guaranteed, nor in providing it does TD Bank Financial Group assume any responsibility or liability.

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