Each day TFO Canada publishes a sample of trade news on the Canadian import market along with any new, updated or changed regulations and legislations regarding international trade; countries in which TFO Canada offers services and on the export sectors which it promotes.
Plummeting gas prices and slumping auto sales drove total retail sales down 1.2 per cent in September. This decline limited retail sales for the third quarter to about half the rate of the previous two quarters. Sales were up 1.3 per cent in the third quarter following back-to-back quarterly increases of 2.4 per cent.
Retail sales fell from $33.3 billion to an estimated $32.9 billion in September, the largest monthly decline thus far in 2006. Most of the decline in September was due to lower sales at gasoline stations and new car dealers. Excluding the automotive sector, retail sales actually increased by 1.0 per cent.
Sales in the automotive sector fell by 5.2 per cent in September. This fall was partially offset by considerable gains in the clothing and accessories stores sector (+6.3 per cent), as well as strong yet smaller gains in the miscellaneous retailers (+2.2 per cent), general merchandise stores (+1.2 per cent), pharmacies and personal care stores (+0.7 per cent) and food and beverage stores (+0.2 per cent) sectors. After four months of advances, sales in the furniture, home furnishings and electronics stores sector were flat in September, while sales fell for the first time in five months in the building and outdoor home supplies stores sector (-0.7 per cent).
Once price changes were taken into account, total retail sales actually grew by 0.2 per cent in September and third quarter growth was 0.9 per cent.
Gasoline prices and auto sales plunge
In September, gasoline prices plummeted by 17.4 per cent causing a record monthly decline of 12.5 per cent in gasoline station sales. In the third quarter, sales at gasoline stations fell by 4.1 per cent after soaring prices caused a record growth of 10.2 per cent in the second quarter.
Sales at new car dealers were also down in September, falling 2.4 per cent after strong gains in July and August. According to the New Motor Vehicle Sales Survey, the number of new vehicles sold was down by 4.2 per cent, mainly due to a 9.0 per cent decline in truck sales. Despite September's decline, new car dealers' sales were up 5.1 per cent in the third quarter. This was the strongest quarterly increase in over four years.
Clothing stores prosper from back-to-school shopping and new fall lines
Clothing retailers reached a near-record sales gain in September as sales advanced by 6.9 per cent. Sales were also strong among shoe, clothing accessories and jewellery stores (+4.7 per cent). Prior to September 2006, sales in both types of stores had leveled off in recent months after a period of strong gains.
The Monthly Survey of Large Retailers indicated that sales of clothing, footwear and accessories grew by 12.7 per cent year-over-year, the largest September increase for this category since 1999. Clothing, footwear and accessories sales among large retailers account for over 50 per cent of total retail sales of that commodity grouping.
General merchandise stores also saw a healthy but smaller sales increase of 1.2 per cent in September. Clothing may have played a part in the gain in this sector, which includes department stores. According to the Quarterly Retail Commodity Survey, about one-quarter of clothing, footwear and accessories sales are from general merchandise stores.
Sales in sporting goods, hobby, music and book stores also saw a spike in sales in September (+4.3 per cent). Almost half the sales in this group came from sporting goods stores, which have a large stake in clothing. Sales were up 2.9 per cent in the third quarter following a relatively weak second quarter (+0.4 per cent). These types of stores have enjoyed consistent growth since mid-2004 and have only experienced two monthly sales declines since January 2006.
Pharmacies and personal care stores enjoyed their 11th consecutive monthly sales increase (+0.7 per cent) in September. Sales in these types of stores have been fairly strong since the start of 2006. After a near-record quarterly growth of 4.7 per cent ending June, sales gains slowed in the third quarter but were still strong at 2.7 per cent.
Within the building and outdoor home supplies stores sector, sales at home centres and hardware stores edged down by 0.2 per cent, only the second monthly sales decline this year. Specialized building material and garden stores, a smaller component of this sector, saw their sales fall by 3.1 per cent.
Most provinces down due to widespread auto decline
Sales declined in 9 of the 13 provinces and territories in September, due to the widespread effect of the decline in the automotive sector. After 11 consecutive monthly sales gains, Alberta retailers experienced a setback as sales fell by 1.1 per cent in September. Alberta sales grew by 2.7 per cent in the third quarter, almost half the rate of the first (+6.0 per cent) and second (+5.4 per cent) quarters earlier this year.
The September sales declines in Ontario (-1.9 per cent) and Quebec (-1.0 per cent) follow a general levelling off in recent months, while the sales decline in British Columbia (-0.9 per cent) marked only the second decline since January 2006.
Saskatchewan saw sales increase by 1.4 per cent, led by the strength of sales by general merchandise stores. Retail sales have been generally increasing in Saskatchewan after a slowdown in the latter half of 2005. Sales also increased in Manitoba (+0.6 per cent). Manitoba retailers have been enjoying healthy growth since 2003 and only experienced one month of sales decline this year.
Related indicators for October
Employment increased by an estimated 51,000 in October following four months of little change. The unemployment rate declined 0.2 percentage points to 6.2 per cent.
Housing starts were up by 6.8 per cent in October to a seasonally adjusted annual rate of 223,200 units, according to Canada Mortgage and Housing Corporation. This increase reflects a rebound in the multiple starts segment, which fell to a two-year low in September. Single starts fell to their second lowest level of the year.
Preliminary sales data from the auto industry indicate that October sales are expected to drop a further 2 per cent, due entirely to declines in passenger car sales. This decrease, combined with the decline in September, more than offsets the gains made in July and August.