Retail in B.C. bucks countrywide trend

While Canadian retail sales fell 1.2% from March to April, led by declines in Ontario and Quebec, B.C. outperformed.

B.C. growth of 1.1% was third-strongest among provinces, behind Saskatchewan and Nova Scotia, and marked a third straight gain for B.C. following a previous lull. At $7.27 billion, April sales were just shy of the previous peak observed in October.

April sales rose a healthy 5.9% on a year-over-year basis, lifting year-to-date growth to 4.7%. Of the latter, sales growth of 3.4% in the Vancouver census metropolitan area was less than the 6% increase experienced in the rest of B.C.

Underpinning the stronger headline figures were gains in motor vehicle and parts sales, particularly for new vehicles. Housing-related purchases also strengthened, with sales up 12% year-over-year at building-material and garden-equipment stores, and up 9% at electronics and appliances shops. The pickup in home-related purchases contrasts with weaker home sales, but could reflect sales related to renovations and completion of new homes, as well as the mild weather and early spring gardening season. Gasoline sales surged 10% from a year ago.

B.C.’s retail environment remains moderately strong, as robust employment gains in 2017, rising wages and tourism flows support spending. Despite a slower housing market and higher interest rates, annual retail sales are expected to maintain a 4.6% annual growth rate.

Despite signs of a home sales bottom in the Lower Mainland, pullbacks in most other markets curtailed provincial Multiple Listing Service (MLS) sales for a fifth consecutive month. Seasonally adjusted B.C. sales declined 3.8% from April to 6,263 units in May, marking the lowest since March 2014. Unadjusted, sales fell 29% from same-month 2017. Mortgage stress tests applied to federally regulated lenders earlier this year, mild increases in mortgage rates and provincial tax policy, including the speculation tax and hikes to the foreign buyer tax, are likely contributing to the decline.

The sharpest sales declines in May relative to April were observed in the real estate board areas of Chilliwack (down 21%), the South Okanagan (down 30%), Okanagan-Mainline (down 6.9%), and Victoria (down 5.7%). Year-to-date, sales were down nearly 17%, with declines led by the Lower Mainland, Victoria and Okanagan-Mainline.

Weaker sales have lifted resale inventory as units sit on the market for longer. That said, active listings remain near historical lows. Sales-to-active-listings ratios remain in a balanced to seller’s market range in nearly all regions of the province, although conditions have cooled from a year ago.•

Bryan Yu is deputy chief economist at Central 1 Credit Union.