Retail sales grew by 0.6% in July, now back to where they were before COVID-19

While July was the third month in a row that sales expanded since bottoming out in April, the rate of growth is slowing down, from 0.7 per cent in June to 0.6 in July. It’s also less than the 1 per cent growth that economists had been expecting. Although the data agency did offer an optimistic glimpse at August’s numbers, showing the early data suggests sales grew by another 1.1 per cent.

Sales of cars and car parts grew by 3.3 per cent, “on continued pent-up demand for motor vehicles following pandemic-driven dealership closures in the spring,” Statscan said.

More cars on the road also helps explain why sales were up by 6.1 per cent at gas stations, too. “The sales gain was attributable to higher gasoline prices and the continued reopening of the economy, as well as more Canadians travelling and buying locally,” Statscan said.

Automotive-related sales helped push up the overall retail sales figure, but not every type of store saw higher sales.

Sales were down at:

• Building material and garden equipment stores.
• Food and beverage stores.
• Sports, hobby, book and music stores.
• Health and personal care stores.
• General merchandise stores.

Bank of Montreal economist Doug Porter noted that declines in some of the sectors listed above were to be expected, since many of them saw huge surges in demand earlier in the pandemic. And most of them have higher sales today than they did a year ago, regardless of COVID-19.

“While the headline gain was a bit shy of expectations, the much bigger and more important picture is that retail and wholesale activity just carved out perfect V-shaped rebounds,” he said. “Now that the pent-up demand has been satisfied in many sectors, expect much more subdued (i.e., normal) figures in the months ahead in the sales data.”

Provincial breakdown

Sales were also up in some parts of the country, but down in others. Sales rose in B.C., Alberta, Manitoba, Ontario and Quebec, but they declined in every other province.

The boom in online shopping seen earlier in the pandemic appears to be running out of steam, as e-commerce sales came in at $2.8 billion for the month, down from $3.5 billion in June.  In April, when most physical stores were shut down, online shopping made up about 10 per cent of all retail sales in Canada. By July, that ratio fell to less than half that — 4.8 per cent.

TD Bank economist Ksenia Bushmeneva noted that at this point in the recovery, all but two categories of goods – sales of gasoline and clothing – have risen above where they were a year ago, which is a good sign. But things are far from back to normal overall.

“The continued federal government income support programs and low interest rates will remain supportive for consumer spending,” she said. “However, there are also significant headwinds, such as the still-high level of unemployment, uncertainty with respect to deferral programs, and rising COVID-19 cases. With the recovery in sales now fully complete, the way forward may be more challenging.”