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Canadian retail sales decline for second consecutive month

H.S. Borji
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Canadian retail sales decline for second consecutive month

Canadian retail sales declined unexpectedly in August for the second consecutive month, a sign consumer spending was beginning to wane in the second half of the year following a strong January to June period.

Retail revenues declined 0.3 percent in August to $42.4 billion, following a 0.1 percent drop the previous month, Statistics Canada reported today in Ottawa. Economists forecast no change.

Retail sales excluding automobiles declined 0.3 percent, following a 0.5 percent gain in July. Economists forecast an increase of 0.2 percent.

In total, seven of the 11 retail subsectors accounting for three-quarters (76 percent) of retail trade posted declines in August.

Retail sales volumes, which more accurately reflect the sector’s contribution to gross domestic product, edged down 0.1 percent in August.

Compared to year ago levels, total retail revenues were up 4.4 percent, official data showed.

July and August represented the first back-to-back drop in retail sales since 2012.

Sales at gasoline stations tumbled 2.1 percent to their lowest levels since the end of 2013, largely a reflection of lower
gasoline prices. The price of gasoline declined 3.2 percent in seasonally unadjusted terms, according to the government’s consumer price index.

Canadian consumer inflation has been at or above the Bank of Canada’s 2 percent target since the spring. Consumer prices increased 2 percent in the 12 months through September, StatsCan reported last week. So-called core prices advanced 2.1 percent annually, official data showed.

Receipts at building material and garden equipment stores declined 1.8 percent in August, following four consecutive monthly increases.

Sales at motor vehicle and parts dealers declined 0.4 percent. Year-on-year, sales in this category were up 8.1 percent.

Furniture stores saw retail revenues decline 1.8 percent from July. Year-on-year, sales in this category were up 6.6 percent, official data showed.

Four of the 11 retail categories made positive contributions in August, led by a 1.8 percent gain at general merchandise stores. These stores saw revenues grow 7.4 percent compared to August 2013.

Sales rose 1.1 percent at clothing and accessory stores. Electronics and appliance stores posted a similar gain.

On a regional level, sales were down in seven of Canada’s 12 provinces and territories. Ontario and Quebec, the country’s two largest provinces in terms of population, saw retail receipts decline 0.5 percent and 0.1 percent, respectively.

August’s drop, which was the biggest since December 2013, raises concerns about the consumer segment of the economy. Consumer spending has been the bedrock of the Canadian economy over the past five years, helping Canada to avoid a disastrous recession that plagued similar economies.

Canada’s retail sector is expected to face a difficult holiday season, according to a recent article published by The Globe and Mail. An increasingly crowded retail market, combined with higher prices and shaky consumer confidence, could weigh on consumer spending in the next several months. Holiday shopping accounts for about 30 percent of total merchandise revenue in Canada.

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