A flurry of new vehicle sales drove a strong start to fourth-quarter B.C. retail sales. Dollar-volume sales jumped 2% from September to a record-high $7.3 billion with growth surpassing the national gain of 1.5% over the same period. Year-over-year, B.C. led all provinces with a 10.5% gain, to lift the year-to-date increase to 9.8%. Metro Vancouver sales rose 12.4% from same-month 2016.
October growth was largely driven by three retail sectors: new cars, health and personal care, and building and gardening supplies. Accelerated year-over-year growth relative to September was observed in new car sales, which rose from a 29% year-over-year increase in September to 38% in October, and health and personal care stores, with growth at 12% compared with 6.8% in September. Building material and gardening store sales were strong at nearly 29%. In contrast, furniture and furnishing, clothing and sporting goods stores detracted from growth.
Annual B.C. retail sales are expected to outpace all other provinces and exceed last year’s 7.4% increase. Robust job and income growth, strong housing markets and low borrowing costs are fuelling consumer spending, with high levels of tourism a further lift. Total retail sales are forecast to rise 6% in 2018 and 5.5% in 2019.
Statistics Canada’s international goods export concentration ratio, meanwhile, confirms what we already know – B.C.’s export economy is well diversified. The index, which ranges from 0 to 1.0, with levels below 0.15 considered to represent high diversification of exports and levels above 0.25 marking a high concentration. B.C.’s ratio was 0.12 in 2016. This reflects B.C.’s diverse endowment of natural resources and value-added products, including natural gas, coal, processed timber products, electricity and other consumer and industrial goods. Alberta, New Brunswick and Newfoundland and Labrador are on the other side of the spectrum.
A diversified export base lowers economic risks. Negative shocks to any specific industry would have modest effects on general export performance in the province, and in some cases could be offset if drivers of an industry-specific decline lift other sectors. Additionally, B.C. is less reliant on the U.S. as a trading destination. In 2016, just over half of dollar-volume B.C. domestic exports flowed to the U.S., compared with a national share of about 75%. B.C. has greater exposure to Asia-Pacific markets, including China, Japan and South Korea, lessening trade risks from increased protectionism in the U.S.•
Bryan Yu is deputy chief economist at Central 1 Credit Union.