January's retail surge proved short-lived as sales retraced in February to the weak pace seen through 2018.
Total retail sales fell 1.9% to $7.15 billion following a 1.8% increase in January despite a lift from higher gasoline prices. Vancouver census metropolitan area (CMA) retail sales declined 3.5% from January to $3.26 billion. February’s sales retrenchment primarily reflected a drop in motor vehicle sales and parts, which fell 6% year-over-year after a near 10% gain in January. Similarly, building and material stores posted a near 12% drop from a year ago, and clothing sales fell 3.5% after an 11% increase in January.
Year-to-date retail sales are up a mild 2.3%. Sales are unchanged from a year ago in the Vancouver CMA, but up a strong 4.2% elsewhere in the province. A key driver of the divergence has been a sharp drop in auto dealer sales in the former (-6%) compared with an 11% increase elsewhere in the province.
While labour market conditions remain robust with solid hiring trends and low unemployment, higher interest rates and the housing market downturn have curtailed purchases of big-ticket items such as vehicles and household goods. Higher gasoline prices could also tighten household wallets on other goods in the near term. Retail sales are forecast to improve through 2019 but will come in below 4%.
Export momentum languished in February as slower growth in the U.S. and the broader global economy continued to curtail demand for goods. Dollar--volume exports fell to $3.28 billion, marking a 3.1% or $105 million decline from same-month 2018. Based on our calculations, this was primarily due to a drop from January in 10 of 12 sectors, with seasonally adjusted sales down 3.6% month-to-month. Seasonally adjusted exports have declined since mid-2018 alongside manufacturing activity.
The most significant declines year-over-year related to metallic and non-metallic mineral products, which fell nearly 35% to $205.9 million following a modest improvement in January. Forestry products (7.3% year-over-year decline), electronic/electrical equipment and parts (6.7% decline) and motor vehicles and parts (5% decline) also slowed. Consumer goods exports remained steady from January and were up 11% year-over-year.
With February’s retreat, year-to-date export growth narrowed to a mild 1.9%. However, weakness has been concentrated in forestry and metal and non-metallic mineral products. Outside of these areas, exports rose more than 8% as non--commodity export growth has held up. Tempered global economic growth remains a constraint to growth; a competitive dollar helps. •
Bryan Yu is deputy chief economist at Central 1 Credit Union.
