If there is one theme that comes from the recently released Statistics Canada report entitled Retail Trade: How the Provinces Fared in 2007, it is how much the strength of the housing market influenced retail trade.

This statement is supported by the fact that three of the four fastest-growing retail sales categories — furniture stores , home electronics and appliances, and specialized building materials and garden stores — all sold goods that generally complimented the purchase of a new or existing dwelling. The regional pattern of retail sales growth also corresponds closely to that of housing starts and home sales, except in Alberta.

For example, Saskatchewan and Newfoundland ranked first and second in retail sales growth and in year-over-year growth of both housing starts and existing home sales in 2007. Growth of retail sales, housing starts and home sales were also strong in British Columbia.

While all provinces saw stronger retail spending in 2007, those with increases below the national average, i.e., Ontario, Québec and Nova Scotia, all recorded sub-par growth of housing starts and/or home sales.

Looking forward, despite a year-to-date slowing of existing home sales and single-family housing starts, total retail spending should continue to be supported by sustained growth of house-related retail spending.

According to the most recent CMHC Renovation and Home Purchase Report, close to half of all homeowners planned to undertake a renovation valued at $1000 or more in 2008, compared to 31% of homeowners in 2007.

However, this situation is unlikely to persist in 2009. According to both Altus Clayton and CMHC, housing starts are projected to fall by five to 10% next year. This slowdown, together with a further pullback in existing home sales, will likely cause a slowdown in house-related retail sales that should dampen total retail spending into the second half of 2009.