Retail spending stalled before pandemic

Retail spending in B.C. stayed flat for a second straight month in January in advance of what will be a steep decline in consumer spending due to the spread of COVID-19.

Total dollar-volume sales at bricks-and-mortar stores reached $7.247 billion (seasonally adjusted), which was unchanged from December. Year-over-year sales declined 0.4%. B.C. sales underperformed compared with the national picture, in which sales rose 0.4% from December and 3.4% from a year ago.

Year-over-year retail sales were especially weak in the durable and semi-durable goods segments, with vehicle and related product sales down 6.5%, furniture and furnishings down 10% and electronics and appliances down 17%. Severe weather may have played a role. Gasoline sales rose 12%.

The data will look much different in the coming months. The impact of COVID-19 on the business environment will largely be unseen until March data rolls around. The pandemic, and necessary policies to stem its spread, have contributed to a collapse in tourism, closures of restaurants and other sectors. Many retailers have temporarily shuttered physical locations offering only online purchases, and consumers have increasingly hunkered down at home amid calls for social distancing. Retail sales will show sharp declines although some segments including grocers and personal health have likely climbed. The severe downturn in retail spending is expected to last until May or June until the pandemic eases.

B.C. Multiple Listing Service (MLS) home sales showed mild improvement in February following January’s pullback, but the outlook has dimmed like nearly all facets of the economy.

Total MLS sales reached a seasonally adjusted 6,889 units in February, up 1.6% from January following a near 14% decline the previous month. This is largely in line with the 10-year average of sales. Monthly sales performance was mixed, with gains in most areas, including Lower Mainland-Southwest (up 3.6%), Vancouver Island (up 2.8%), and northern B.C. (up 2.8%). Fewer sales in the Okanagan were the main offset. Broadly, housing demand was supported by solid population growth, tight labour markets and low interest rates.

Sales will decline through mid-year as the spread of COVID-19 curtails household demand. Prospective buyers are delaying major purchases given fears of spread, advisories of social distancing and a downturn in the economy and labour market. •

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