Robust retail demand continued in December despite a second straight decline in sales. The dollar volume of sales in B.C. fell 0.6% to $7.2 billion (seasonally adjusted) but rose 10.6% on a same-month basis, besting all other provinces.
Lower sales in most sectors outside of motor vehicles pointed to a broad weakening of sales in December, but may reflect changing seasonal factors as holiday shopping has shifted due to the growing importance of Black Friday north of the U.S. border and online purchasing.
While monthly sales crested early in the fourth quarter, annual growth reached a spectacular 9.6% for the year, led by a 10.6% increase in the Metro Vancouver area. Nationally, sales rose 6.7%. B.C. sales growth was up from 7.4% in 2016, marking the strongest showing since an 11% gain in 1994. Outperformance reflects high levels of consumer demand driven by robust employment growth, high levels of housing activity and population growth, and elevated tourism flows.
Total retail sales are forecast to moderate this year to a 5.3% annual gain. The economy is anticipated to decelerate from a 3.7% pace to 3%, and employment gains are anticipated to slow to 2%, which will affect consumer demand. Headwinds to the housing economy from tighter mortgage regulations and further demand restrictions introduced in the 2018 B.C. provincial budget are likely to affect sales of related goods.
Meanwhile, the number of international tourists arriving in B.C. fell for second straight month in December but remained robust to cap off an exceptional year for the tourism industry. Fewer U.S. visitors contributed to a mild 0.8% dip in total international tourists relative to November, but levels were up 2.7% from the same month in 2016. Annual growth reached 3.3% to 5.7 million persons, following a 12.3% surge in 2016. This marked a cyclical and record high that was 14% above previous cycle peaks in 2000-2002.
Growth in overseas visitors outpaced U.S.-based visits during the year, although the latter makes up about 64% of total tourists. Visits from overseas grew 5.7% in 2017, led by higher inflows from Germany (up 16%), China (up 7.3%), Mexico (up 11%) and Australia (up 20%).
The upward trend in flows reflected various factors, including a competitive Canadian dollar and rising incomes in markets like China, while the politically divisive environment in the U.S. has contributed to a rotation of global tourism dollars away from the U.S. •
Bryan Yu is deputy chief economist at Central 1 Credit Union.
