Consumers were not in a spending mood heading into the holidays.
While rebounding 1.1% in November following a prior-month decline, B.C. retail sales remained sluggish.
Year-over-year growth remained soft at 0.6%, following a drop of 0.3% in October. November’s rebound was led by higher sales at motor vehicle dealerships and home furnishings and home improvement stores. Despite November’s uptick, retail spending continued to disappoint. Year-to-date sales growth was a scant 0.6% and is tracking the weakest annual performance since 2009, when sales declined 4%. Spending in Metro Vancouver declined 0.7% compared with a 1.7% increase in the rest of B.C.
The lack of retail traction is at odds with a tight labour market, wage gains and strong population expansion. Several factors are constraining sales. Households have likely reduced spending given high debt loads, rising shelter costs and increased food prices.
Meanwhile, sales continue to shift online both from divisions of traditional retailers and from exclusive e-commerce stores.
Replacement demand for vehicles has also declined following several years of strong sales and could be further limited given Vancouver’s approval of ride-hailing. Retail sales growth is forecast to rebound to 4% in 2020 owing to population expansion and improved housing demand.
International tourist visits to B.C. fell again in November, adding to a downtrend in visits following a summer peak. Total international tourist visits declined 1.1% on a year-over-year basis. Adjusting for normal seasonal influences, inflows declined 1.4% to 502,564 persons from October following a 3.1% drop the prior month, marking the lowest level since February.
The recent downturn in visitors from the U.S. and overseas suggests a peak in the tourism cycle. While the sector is supported by a low Canadian dollar, some aversion to the U.S. given political issues, and the potential of a boost due to gawkers hoping for a glimpse of the post-“Megxit” Duke and Duchess of Sussex, there is little further upside. Canada-China relations remain sour and will continue to limit visitors, while risks of the coronavirus may curtail broader travel demand.
Nevertheless, total tourism inflows were on track for a record high with year-to-date tourist visits up 2.6% through November. This was led by a 2.8% increase in visits from the U.S. Based on traveller data, which includes same-day travel, growth in overseas visits was driven by large increases in inflows from Mexico (up 13%), Hong Kong (up 11%), India (up 22%) and Japan (up 10%). In contrast there was a 9.4% slump in visitors from China. •
Bryan Yu is deputy chief economist at Central 1 Credit Union.
