The latest B.C. retail sales estimates are bittersweet.
Sales rose strongly in February to mark a four-month upward trend. Of course, we won’t know if that improvement would have persisted given the current reality. COVID-19 containment measures have pummelled bricks-and-mortar spending for non-essential items and contributed to temporary store closures and a spike in layoffs.
A shift to online sales has provided only slight offset for local businesses, while online giants like Amazon have likely benefited. Grocers, health and personal product stores and other retailers of household essentials have likely performed well as more families stay home. February data showed a sharp increase in retail spending of 1.2% from January to $7.37 billion, marking a 2.3% year-over-year gain.
Recent events mean sales will be sharply lower in March and April, particularly at new vehicle dealers, gasoline stations, clothing stores and other non-essentials. Google location data suggests a sharp decline in mobility since containment measures have been implemented. Trips to retail and recreation locations have declined 50% since a baseline of January through February.
Higher retail spending is expected in the year’s second half following easing of containment measures.
Despite this upward trajectory, we forecast retail spending to decline 12% this year before rising 7% in 2021.
B.C. consumer price inflation (CPI) fell sharply in March, owing largely to sharp declines in gasoline prices and travel. CPI inflation fell from a year-over-year increase of 2.4% in February to 1.2% in March.
Among other key goods and services, the bite of the economic downturn was evident. Food prices were unchanged from February, contributing to deceleration of year-over-year price growth to 2.9% in March from 3.7% the previous month. Headline prices generally decelerated as prices declined from February. Broadly, goods prices decelerated from 2.8% to 0.5%, while services declined from 2% to 1.8%.
Weaker inflationary pressure is expected due to low gasoline prices and constrained demand. There is, however, risk of some supply-induced inflation for meat and produce due to effects of the COVID-19 pandemic on the domestic supply chain and availability of workers. Caution is warranted when examining inflation at this time because access to goods and services is constrained. •
Bryan Yu is deputy chief economist at Central 1 Credit Union.