Retail spending in B.C. rebounded in January as retailers posted their strongest monthly sales gain since April 2018.
Total sales jumped 1.4% from December to a seasonally adjusted $7.28 billion. This was the second-strongest gain among provinces, trailing only Nova Scotia, and compared with a national decline of 0.3%. Year-over-year, sales increased 2.6% following a 0.8% increase in December and led all provinces.
Sales improved across most retail segments. Motor vehicle and parts sales rebounded, with sales up 5.1% year-over-year, compared with a 10% drop in December.
On the flip side, weakness persisted in housing-related sectors, with home furniture and furnishings down 7.9% and electronics and appliance stores down 3.7%. Vancouver census metropolitan area retail activity grew slower than the rest of the province with sales up 1.3% from December and 0.9% from a year ago.
January’s uptick in provincial sales is an encouraging sign that consumer demand is firming following 2018’s disappointing 2% gain – the slowest pace since 2012. That said, given the subdued trend in recent quarters, more positive readings in the months ahead are needed to establish an upward trend. Any gains this year, which we forecast at 3.6%, are likely to be modest. The housing market downturn continues to work its way through the economy and will hold back spending on related goods, and slower global economic growth may hurt consumer confidence. Population growth and a tight labour market will keep supporting demand. Interest rates will likely hold steady, given economic headwinds, and will provide some support for rate-sensitive purchases.
Tourism-sector strength extended into 2019 with a near-record-high number of international tourists flowing to B.C. Total entries to Canada via a B.C. customs entry point reached a seasonally adjusted 513,744 persons. This was up 1% from December and nearly 5% on a year-over-year basis. U.S. tourist visits slipped 0.5% from December, but this was offset by a 3.7% increase in overseas visitors. Driving this gain was a 7.3% increase in visitors from Asia. Despite a slip, U.S. visits are at the highest level since the early 2000s and overseas tourist visits are at record highs.
Prospects for the tourism sector are solid. The Canadian dollar is expected to remain low given soft Canadian economic conditions and interest rate expectations. This, along with some aversion to the U.S. political environment and Canada’s reputation as a relatively safe country, will continue to maintain elevated tourism activity. That said, growth has likely peaked. •
Bryan Yu is deputy chief economist at Central 1 Credit Union.
