The dollar volume of B.C.’s retail sales was up 0.4% in February to $7.13 billion compared with January.
While the gain, which was consistent with a countrywide increase, was the first since October, recent months’ declines reflected a give-back after an October surge. Segments posting stronger growth included motor vehicles, building materials and gardening equipment and gasoline stations. While the trend has crested, elevated sales reflect strong consumer demand.
Year-to-date sales growth reached a solid 4.7% over two months. Excluding sales of vehicles and gasoline, which provide a better indication of underlying consumer demand, sales are 6.5% higher over the period, which is well above the 3.5% national gain.
Strong employment growth trends and rising wages continue to support sales. However, retailers will face headwinds of higher interest rates on vehicle demand and indirect pressure from slower sales of furniture and appliances caused by a cooler housing market.
B.C. manufacturing sales retreated for a fourth consecutive month in February, signalling a slowdown in the sector following strong upward momentum for most of 2017.
The decline may not be a symptom of weaker demand but instead could reflect capacity issues. Rail transportation bottlenecks, particularly a shortage of railcars, have constrained exports of commodities such as agricultural and forest products. The forestry sector is operating roughly at peak capacity, and inventory is growing as a result. The prospect of a strike at CP Rail could further hurt future sales.
Sales are forecast to grow 5% in 2018, down from an 8% increase in 2017. Export conditions remain favourable with improving global economic growth, strong lumber demand and pricing and a competitive dollar. That said, transportation bottlenecks continue, and long-term lumber supply constraints and uncertainty over U.S. trade policy could pose problems for the sector.
The tightening labour market is an important theme for B.C.’s economy this year. The latest employment insurance (EI) beneficiary counts further underscore this strong environment for workers and the hiring challenges for employers. EI counts continued to trend lower in February, with a seasonally adjusted 45,370 individuals on the roll. This was down 0.5% from January, extending a downward trend going back 16 months. Year-over-year, the EI count was down 15% to the lowest number since late 2008, which preceded the surge during the financial crisis. •
Bryan Yu is deputy chief economist at Central 1 Credit Union.
