B.C.’s retail sales cycle looks to have peaked during the fourth quarter as January sales continued to moderate.
Seasonally adjusted sales fell 1% to $7.11 billion, lagging behind a mild 0.3% national gain, due mostly to lower vehicle sales and lower post-holiday sales at various retailers.
Nonetheless, retail demand remains high, with year-over-year unadjusted sales growth of 7.4%, compared with a 5.6% national increase. B.C. has led retail sales growth in recent years owing to strong employment gains, population inflows and wage raises. The growth is particularly impressive given inroads by online retailers.
Same-month growth was strongest in the motor vehicles and parts segment (up 12.9%) despite deceleration. Housing-related purchases were also a strong driver, including electronics and appliances (up 17%) and building materials, gardening equipment and related products (up 14%).
Seasonally adjusted sales in the Vancouver census metropolitan area fell a more modest 0.4% from December, with actual sales up a strong 10% on a same-month basis compared with 2017.
Given rapid acceleration in early 2017 and consistently strong year-over-year growth, the recent slowdown is not of concern.
Central 1 Credit Union forecasts growth of 5% this year with a less active housing market and a higher interest-rate environment slowing growth. Inflation associated with tight labour market conditions and higher gasoline prices generates upward pressure on retail prices.
Population growth remained on an upswing in the fourth quarter. Year-over-year growth accelerated to near 1.4% from 1.3% in the previous quarter to lift total population to 4.85 million persons, marking a calendar-year gain of 65,981 persons.
Higher international migration underpinned gains but reflected a surprise surge in the number of non-permanent residents that occurred during the third quarter, driven by a rise in study permits. Policy measures by the government to keep foreign students in Canada after graduation, and possible aversion to U.S. schools, may be drivers of the increase.
Net interprovincial migration fell to 10,202 persons in calendar year 2017, from 22,470 persons in 2016. Interprovincial flows are typically aligned with the economic cycle. A rebound in economic conditions in Alberta and moderate growth in Ontario have lessened the attraction of B.C.
Rising population levels are supporting consumer and housing demand. •
Bryan Yu is deputy chief economist at Central 1 Credit Union.
