For the second reporting period in a row, total retail sales in Canada increased by 1.0% month-to-month (i.e., June versus May), according to Statistics Canada. Since retail sales are notoriously volatile, trends become clearer in three-month moving average or “smoothed” data. On this basis, total retail sales in Canada have been flat, at -5.0% year over year, throughout the first half of this year. This is basically good news, since it means that they are not deteriorating any further, after the sharp declines in late 2008. They appear to have bottomed out at a level well above the comparable figure in the United States of between -9.0% and -10.0%. The latest U.S. data is for July and is therefore a month ahead of what is being reported for Canada.

“Cash for Clunkers” Program

Of particular note has been the improvement in auto sector retail sales in both countries. Much of this is due to higher gasoline prices. But that’s not the only reason. In the U.S., the “cash for clunkers” program − with the official name Car Allowance Rebate System or CARS for short − has resulted in a surge in unit sales of automobiles. This federal government initiative had even more success in August than in July, so watch for that in next month’s stats. In fact, CARS has been over-subscribed. The $1 billion that was first made available has been exhausted and Congress will likely add a billion or so more to the pot.

Home Reno Tax Break

The $1,000 tax break for home reno repairs of up to $10,000 is helping home centre and hardware store sales in Canada. Furthermore, the declines in home prices and housing starts in both the U.S. and Canada have leveled off. Buying items for the home is a top priority for consumers everywhere. The surge in U.S. auto sales will be a boon to Canada as well, since at least two of the most-successful fuel-efficient smaller car models are made in this country, the Toyota Corolla and the Honda Civic. This solidifies jobs in some regional labour markets and helps with consumer buying intentions.