Retail Sales Growth Diverges between Canada and U.S.
With respect to the recent hand wringing about the economy, you’d wonder what all the fuss is about when you take a look at Canadian retail sales in the latest month for which data is available. For July 2008, total retail sales in Canada were a quite respectable +4.9% year-over-year on an actual basis and +3.9% year-over-year on a three-month- smoothed basis. No, there is not a disconnect. It is just a matter of timing.

For starters, retail sales figures are a couple of months out of date, but they are the best that we have from Statistics Canada. Also, employment in Canada has been holding up quite well so far during these confusing times. The jobs picture in the United States is another matter, however. The combined job loss in the U.S. since the start of this year is nearly 600,000. U.S. retail trade figure have been released through August and they show a particular nosedive for motor vehicles and parts. As for U.S. overall retail sales, they are clearly in negative territory once an inflation rate of 5.4% is taken into account.

Harder times are coming to Canada as a result of the worldwide financial meltdown in two ways. The first will occur through a continuation of weak demand from the United States for our manufactured goods. As U.S. economic problems accumulate, the prospect of Canadians maintaining sales south of the border recedes into a swirling fog of uncertainty. Second, slowing growth worldwide is lowering the demand outlook for the commodities sector. Canada has come to depend, to an inordinate degree, on its sales of raw materials to the rest of the world in order to achieve prosperity.  

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