Canadian retail sales in January advanced 0.5% on a month-to-month basis, according to Statistics Canada. That left them 4.7% higher than at the beginning of last year.
A good benchmark figure for retail sales is +5.0% year over year. Therefore, the latest result in Canada is pretty good, although not outstanding.
Retail sales figures are reported in current (i.e., not adjusted for inflation) dollars.
The reason for the +5.0% benchmark is that if one takes away normal inflation of +2.0%, that leaves a “real” or “volume” increase of 3%. This roughly corresponds with what might be expected from personal consumption expenditures (PCE) in the national accounts.
In Canada, PCE makes up 55% of GDP. Therefore, a PCE growth rate of 3.0% lays down a solid base for gross domestic product (GDP) growth. (In the U.S., consumer spending is 70% of GDP. The reason for the disparity between the two countries is that foreign trade is a bigger part of the whole in Canada).
The reason retail trade was so strong in January was thanks to the automotive sector. Sales by motor vehicle and parts dealers were +3.7% month to month and +11.7% year over year.
In its separate new motor vehicle sales report, Statistics Canada recorded a surge in units moved in January – +15.4% month to month and +15.5% year over year.
Certain models of passenger cars became available again, driving that category of sales (i.e., as opposed to “vans, trucks and buses”) forward by nearly a quarter, both month to month and year over year.
Exclusive of the vehicle sub-component, Canadian retail sales in January were -0.5% month to month and only +2.2% year over year, a mediocre performance at best.
Other than vehicles, only a handful of retail sector sub-categories in Canada turned in stellar performances in the latest month. The standouts were clothing and clothing accessory stores (+6.9% year over year) and general merchandise stores (+4.4%).
Gasoline station sales were strong in current dollars at +5.3% year over year, but that was lower than the increase in the price of petrol (+6.8% as recorded in the consumer price index).
Regionally, it’s interesting to note that Alberta’s year-over-year increase in retail sales (+9.5%) led all the provinces. Saskatchewan also did well (+6.4%).
The increase in Alberta was a combination of several factors. That province currently has the lowest unemployment rate in the country and the highest rate of job creation.
Alberta is also experiencing the fastest population growth among all provinces – +2.0% between January 1 2011 and January 1, 2012, versus +1.1% for the country as a whole.
While it may be simplistic to say, more people generally equates with more spending.
Year-over-year population changes for some of the other provinces in the latest Statistics Canada demographic estimates are: Saskatchewan (+1.6%); Manitoba (+1.3%); Ontario (+1.1%); British Columbia (+1.0%); and Quebec (+0.9%).
That covers off Canada. What’s been happening with retail sales in the U.S.?
The U.S. numbers are about five weeks more current. February results were issued on March 13.
According to the Census Bureau, U.S. total retail sales jumped 1.1% in the latest month to stand 6.5% higher than in February of last year.
In percentage terms, and contrary to the message that seems prevalent in the media, consumers are being freer with their wallets south of the border than they are here at home.
Moreover, the U.S. strength in spending is more broadly based, encompassing all manner of goods and services.
Seven of 13 major sub-categories in the retail sales report recorded year-over-year percentage increases that were higher than for the sector as a whole (+6.5).
Those seven were: building material and garden equipment suppliers (+13.8%); gasoline stations (+10.3%); non-store retailers (+8.5%); furniture and home furnishing stores (+8.3%); food services and drinking places (+8.2%); clothing and clothing accessory stores (+7.3%); and motor vehicle and parts dealers (+6.9%).
The increase for gasoline stations (+10.3%) was a little less than the rise in cost to fill up at the pump (+12.6%).
Electronics and appliance store owners suffered through a grim time in the U.S. (-1.4% year over year), but not to the same degree as their counterparts north of the border (-6.4%).
There’s one final point to be made. The slopes of the actual retail sales graphs since the end of the recessions in both Canada and the U.S. have been every bit as steep as they were before 2008.
If anything, the angle of the U.S. curve may be slightly more elevated. Just as many race car drivers feel a need for speed, there are a goodly number of shoppers who – for a variety of both worthy and more questionable reasons – are compelled to spend.
I don’t mean to belittle this tendency. It’s what the economy depends on.