Retail sector momentum eased in August pointing to a topping out of the sales rebound following an early pandemic plunge.
Sales at B.C. bricks-and-mortar stores rose 0.5% from July with unadjusted sales up 5.7% from same-month 2019. This slowed from a reading of 2.2% and 8.7% the previous month. Nevertheless, the latest sales exceed February pre-pandemic levels by 2.9%, marking a record high. September sales were likely flat.
Higher spending reflects pent-up consumer demand from the spring as well as reallocation of recreational spending towards housing, ancillary products and other goods spending. That said, August patterns were mixed as demand is increasingly satiated for large-item purchases.
With sales more than rebounding to pre-pandemic levels, the year-to-date decline narrowed to a modest 1.9%. Sales in Metro Vancouver were down 4% compared with a flat performance elsewhere in the province.
Retail store sales are a proxy for consumer spending but omit rising e-commerce sales, which nationally were up 68% year-to-date. That said, demand for services has waned as people have continued to avoid restaurants, theatres and other venues. Rising COVID-19 cases, a return to school and colder weather are all set to constrain consumer spending into the end of the year.
Consumer prices firmed in September, but headline inflation was benign according to Statistics Canada. B.C.’s consumer price index rose to a year-over-year rate of 0.4% during the month, compared with 0.15% in July and August. Nationally, year-over-year consumer prices rose to 0.5% from 0.1% the prior month.
While headline inflation was low, inflation varied widely among products. Due to the pandemic there was weak demand and sell-through of inventory, curtailing clothing prices (-3.5%), while gasoline prices were down 13% from a year ago. Travel services fell 14.1%. In contrast, some segments are experiencing firm pricing conditions, which is likely due in part to flow-through of higher costs of hygiene products and personal protective equipment. Personal care service prices rose 9.8% year-over-year, and child care was up 4% while restaurant meals were surprisingly firm at 2% considering weaker demand.
For the most part, total inflation is likely to remain below 1% heading into 2021 due to tempered demand in the economy. •
Bryan Yu is deputy chief economist at Central 1 Credit Union.
