Hints of a slowdown

Canadian shoppers’ reluctance to open their wallets in April points towards slower economic growth for the rest of the year, but not the start of a serious downward trend in consumer spending, economists say.

TORONTO — Canadian shoppers’ reluctance to open their wallets in April points towards slower economic growth for the rest of the year, but not the start of a serious downward trend in consumer spending, economists say.

“We usually look beyond the one-month dip, we look at the longer term trend and conditions are still present for Canadian consumers to continue to spend,” said CIBC economist Krishen Rangasamy.

Retail sales decreased to $36.2 billion in April, down two per cent from the previous month after a gain of 2.2 per cent in March from February, according to Statistics Canada figures released Wednesday.

The year-to-date retail sales are still up compared with the first four months of 2009, which Canada was in the grips of a major recession.

The month-to-month drop in April was several times larger than economists had projected, largely due to extra buying in March that skewed sales figures.

“We saw a weather-induced shopping spree in March. We saw clothing just rise significantly and it was inevitable you were going to see a decline (in April) because Canadians had brought forward a lot of their purchases of clothing and shoes and all those seasonal items,” Rangasamy said.

Statistics Canada said 10 of 11 retail subsectors and in all provinces showed declines in April, following an overall upward trend since the beginning of 2009.

The only subsector to register a gain was electronics and appliance stores, where sales increased 0.6 per cent. Among the notable declines was a 5.3 per cent drop for new-car dealers and a 5.2 per cent decline in sales at clothing and clothing accessories stores.

BMO Capital economist Douglas Porter attributed the decline primarily to reduced sales volumes, which fell by 1.9 per cent after a 2.3 per cent spike in March.

TD Economics saw the numbers somewhat differently, though, saying lower prices for gasoline were also a factor — although it agreed that the retail numbers were affected by lower sales volumes.

“In addition to a price-induced decline in gasoline store sales, a major pull-back in sales at motor vehicle and parts dealers (-4.8 per cent) was the greatest culprit behind the sales drop in April. Excluding these two auto-related areas, retail spending fell a more muted one per cent compared to March,” TD economist Derek Burleton wrote.

The economists said April’s numbers weren’t a major concern but likely signalled a somewhat slower pace of growth for the Canadian economy compared with the robust first quarter of 2010 and fourth quarter of 2009.

Even April was up compared with the same month of 2009, when the economy was still near the bottom of the 2008-09 recession. Overall retail sales for the country were up 6.6 per cent from $33.9 billion in April 2009.

But the Canada economic growth is widely expected to slow down in the second quarter and for the rest of the year from the unusually strong 6.1 per cent in the first quarter.

The once-hot housing market is already showing signs of cooling and statistics, including GDP growth and spending figures, reported later this year will compare less favourably to a strong second half of 2009.

Burleton said April’s retail data suggest that growth in consumer spending likely moderated in the second quarter, which ends June 30, after an “oversized gain” of 4.4 per cent in the first quarter.

TD remains confident the economy expanded by a strong 3.5 to four per cent in the second quarter as a whole but said the race to beat out low interest rates earlier this year has probably brought sales forward from the future and sapped pent-up demand.

CIBC revised its forecast for GDP growth in April down slightly from a projected 0.2 per cent increase to no change after the retail figures were released. However, the bank still predicts growth of three per cent for the second quarter.

Entering the second half of the year, a new tax regime in Ontario and B.C. could drive higher consumer spending figures in June in advance of the July 1 implementation date, Rangasamy said.

“We might see a big boost in June and then a dip in July, but having said that consumers still have to spend it doesn’t mean a dip in July and continual decline after that,” he said.

That’s because conditions are still favourable for Canadians to spend. The labour market is improving and household incomes continue to rise. Meanwhile, interest rates, which can affect purchases of big ticket items such as automobiles and appliances, are expected to rise only gradually.

“Those lead us to believe there’s still room for consumers to contribute to GDP this year,” Rangasamy said.

“It might be at a slower pace because we think the economy’s going to slow down towards the end of the year, but consumers are still going to be big contributors to GDP.”

Get local stories you won't find anywhere else right to your inbox.
Sign up here

Just Posted

House sales remain hot in central Alberta with first-quarter sales nearly double last year’s numbers. Photo by PAUL COWLEY/Advocate staff
Central Alberta real estate market hot in 2021

Residential sales nearly double 2020 in first quarter

Red Deer Mayor Tara Veer gave an update on Olymel's COVID-19 situation on Wednesday. (File photo by Advocate staff).
Veer addresses rising COVID-19 cases in Red Deer

Red Deer has added nearly 200 cases of active COVID-19 cases in past week

Alberta’s chief medical officer of health Dr. Deena Hinshaw and Premier Jason Kenney say the province would look at adding additional COVID-19 measures in the coming weeks if the virus continues to spread. (Photo by Government of Alberta)
Walk-in COVID-19 vaccination clinic to open in Red Deer

Alberta adds 1,345 new cases of the virus

Innisfail RCMP are investigating a single-vehicle crash that happened west of Bowden on March 21, 2021. (File photo by Advocate staff)
RCMP investigate culturally insensitive graffiti at Sylvan Lake school

Sylvan Lake RCMP is investigating a vandalism incident. On April 17 around… Continue reading

A vial of the Medicago vaccine sits on a surface. CARe Clinic, located in Red Deer, has been selected to participate in the third phase of vaccine study. (Photo courtesy www.medicago.com)
Red Deer clinical research centre participating in plant-based COVID-19 vaccine trial

A Red Deer research centre has been selected to participate in the… Continue reading

Vancouver Canucks' Tanner Pearson, right, celebrates after scoring against Toronto Maple Leafs goalie David Rittich during the third period of an NHL hockey game in Vancouver, on Tuesday, April 20, 2021. THE CANADIAN PRESS/Darryl Dyck
Pearson, Sutter each score twice as Canucks dump Leafs 6-3

Pearson, Sutter each score twice as Canucks dump Leafs 6-3

Everton's Gylfi Sigurdsson celebrates with teammates after scoring his side's second goal during the English Premier League soccer match between Everton and Tottenham Hotspur at Goodison Park in Liverpool, England, Friday, April 16, 2021. (Peter Powell/Pool via AP)
Super League collapses after the 6 English clubs withdraw

Super League collapses after the 6 English clubs withdraw

Boston Red Sox starting pitcher Eduardo Rodriguez delivers against the Toronto Blue Jays during the first inning of a baseball game Tuesday, April 20, 2021, at Fenway Park in Boston. (AP Photo/Winslow Townson)
Bogaerts’ 3-run HR, Rodriguez lift BoSox over Blue Jays 4-2

Bogaerts’ 3-run HR, Rodriguez lift BoSox over Blue Jays 4-2

Pound says Olympic qualifying issues a concern to IOC

Pound says Olympic qualifying issues a concern to IOC

Former University of Victoria rowing coach Barney Williams is photographed in the stands during the Greater Victoria Invitational at CARSA Performance Gym at the University of Victoria in Victoria, B.C., on Friday, November 29, 2019. THE CANADIAN PRESS/Chad Hipolito
Rowing Canada sanctions former head coach of B.C. varsity women’s team

Rowing Canada sanctions former head coach of B.C. varsity women’s team

Ontario Hockey League cancels 2020-21 season as COVID-19 cases surge in province

Ontario Hockey League cancels 2020-21 season as COVID-19 cases surge in province

Lionel Desmond (front row, far right) was part of the 2nd battalion, of the Royal Canadian Regiment, based at CFB Gagetown and shown in this 2007 handout photo taken in Panjwai district in between patrol base Wilson and Masum Ghar in Afghanistan. THE CANADIAN PRESS/HO-Facebook-Trev Bungay MANDATORY CREDIT
Desmond inquiry: Veterans Affairs submits internal review after initial refusal

Desmond inquiry: Veterans Affairs submits internal review after initial refusal

FILE - In this Feb. 18, 2021 file photo State representatives gather at the Capitol, in Phoenix. Two years after Arizona lawmakers repealed a law barring any instruction on HIV or AIDS that that "promotes a homosexual lifestyle," they are close to enacting a broad remake of the state's sex education laws with a particular focus on LGBTQ issues. (AP Photo/Matt York,File)
Arizona governor vetoes strict sex education legislation

Arizona governor vetoes strict sex education legislation

Most Read