Falling vehicle sales put brakes on B.C. retail

B.C. retailers posted another down month in June as sales volume declined 0.4% from May to $7.16 billion, with year-over-year growth a negligible 0.7%.

The latter underperformed the national gain of 1%. Retail spending in B.C. has held range-bound for more than a year but has eroded sharply in recent months at an annualized pace of nearly 5%.

June’s sales decline was predominantly led by further declines in vehicle-related sales, which fell 5.1% year-over-year. Gasoline sales were also a drag, which is largely price driven. Excluding these segments, sales improved, with a 3% year-over-year gain and a 1% increase from May (seasonally adjusted).

Through the first six months, B.C. bricks-and-mortar retail sales growth came in at a disappointing 0.6%, and is negative once inflation has been factored in. Like June figures, this decline can be attributed to the slump in new vehicle purchases with related retail sales down 6.8% ($574 million) over the first six months, as well as a 3.9% decline in building material and garden supply sales. Furniture sales growth has been negligible at 0.2%. In contrast, solid growth was observed in most other retail segments including a near 6% increase at general merchandisers and a 2.8% gain at food and beverage stores. This divergence in trends reflects solid demand for general purchases due to a strong labour market and population growth, but a drag from a slow housing market and some aversion to debt accumulation.

Regionally, Metro Vancouver sales have led the slump with sales down 1.3%, compared with an increase of 2.3% in the rest of the province. New vehicle sales in the former were down a whopping 14%. Interestingly, housing-related sales in the region outperformed the rest of the province with positive gains.

Tourism remains a solid growth sector for B.C.’s economy, as international tourist visits remained high in June following a record May performance. The number of tourists entering Canada through B.C. reached 535,344 individuals (seasonally adjusted) in June. While edging lower from May, this was up 2.7% from same-month 2018. The flow of U.S. visitors continued to rise, offsetting a decline in overseas visitors. That said, the latter remains near record highs.

Year-to-date, tourist visits are up 2.4%, with U.S. visits up 1.6% and overseas visitors up 3.6%. The latter has been lifted by strong growth in tourism from countries like Mexico, India, Australia and the U.K. These gains have offset a slump in the number of visits from China. A low Canadian dollar continues to support tourist demand. •

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