B.C.’s retail sector mired in tepid growth

Soft retail sales continued through September at B.C. bricks-and-mortar stores.

Following a 1% gain in August, sales fell back by 0.2% to $7.2 billion, with year-over-year growth at an anemic 0.6%. Retail trends have held range-bound since early 2018.

Slower sales in most retail segments contributed to September’s dip. Year-over-year sales in motor vehicle and parts stores fell 4.7%, while sales fell 4.3% at home furniture and furnishing stores. Clothing stores posted a 6% year-over-year decline. Gasoline sales fell 2%, owing to lower prices.

With year-to-date sales rising only 0.6% through September, annual gains will fall short of 1% this year, marking the weakest growth performance since a 4% contraction in 2009 during the global financial crisis. Tepid sales this year thus far reflect a 0.9% decline in Metro Vancouver, owing mostly to an 11% drop in new car sales. Sales outside Metro Vancouver rose a mild 1.8% over the same period.

The disappointing sales environment is at odds with rising employment and population and modest economic growth. Likely factors holding back activity include elevated household debt, lower replacement demand for vehicles following stronger sales in recent years, and flow-through of fewer home sales on related purchases. Rising e-commerce sales are also pinching sales of traditional retailers. Countrywide, retail e-commerce sales rose 35% year-over-year. While still representing only 3.6% of total retail trade, the share continues to rise and compares with 2.7% a year ago.

An increase in home sales through 2020, low interest rates and economic growth are expected to lift B.C. retail sales growth to 4% in 2020.

B.C. manufacturing sales improved in September but continued to struggle under a weak global economic performance and the forestry-sector downturn. Dollar-volume sales reached a seasonally adjusted $4.4 billion, up 3.7% from August but down 3.2% year-over-year. Sales have been on a downward trend since mid-2018. Across the country, factory sales fell 0.2% from August, and 1.2% from a year ago.

Monthly sales growth from August was driven by a 7.3% increase in non-durable goods despite a decline in paper production sales. Durable goods growth of only 0.9% was propped up by a partial rebound in wood product sales, as metal and non-metallic mineral sales declined. Stronger gains were also observed in machinery and in computers and electronics.

Nevertheless, the trend remains negative. Year-to-date, manufacturing was down 2.2%. Paper production is down 12% and wood production has declined 25% on lower prices and production. •

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