The Conference Board of Canada has shared new insights into retail sales for the end of 2021.

Highlights include:

  • Retail sales rose by 0.7% month-over-month (m/m) in November, after posting a 1.6% expansion in October. In volume terms, sales increased by 0.2%.
  • Statistics Canada’s flash estimate for December suggests that sales decreased by 2.1%. However, this preliminary estimate is based on responses from half of the surveyed companies, so this figure will likely change.
  • Retail sales were up in seven provinces. Quebec posted the largest increase, rising 1.2%, while Ontario (+0.5%) grew more moderately. Meanwhile, sales in British Columbia experienced a 0.8% expansion despite severe flooding in November.
  • Sales at gasoline stations rose by 4.9% in November, much higher than October’s 0.2% increase. Meanwhile, sales at motor vehicle and parts dealers declined by 0.3%.
  • Core sales (excluding gasoline and motor vehicles) increased by 0.5%. Building material and garden equipment and supplies dealers (+3%) witnessed one of the largest increases, while sporting goods, hobby, book and music stores (-10%) posted a significant decline.

Key insights:

  1. The Omicron variant swept through the country before the holidays, with most provinces seeing record high cases and hospitalizations. This forced many provinces to impose stricter restrictions, with the common denominator being limited customer capacity for retailers. On top of that, steadily rising prices, waning household savings, and lingering supply chain disruptions are also taking their toll on the retail industry.
  2. But will the supply crunch end soon, you ask? While sales in constant dollars indicate a slightly higher volume of goods sold in November (pointing towards a smoother supply chain), the recent vaccine mandate imposed by the Federal government on U.S truck drivers crossing into Canada is likely to exacerbate the supply problem further. As much as 20% of American truck drivers crossing the border could be affected by the new restriction. This comes at the time of the year when Canada is more dependent on U.S exports, especially for fresh food produces that won’t grow during our winter months.
  3. Following the Conference Board’s latest forecast, it expect retail sales to decline over the next two quarters, as pandemic related issues linger in many sectors of the economy. Retail sales will then expand moderately during the second half of the year. While the Conference Board is still optimistic about the future, new waves of the virus could deter our outlook despite Canada’s high vaccination rate. As has been seen with Omicron, widespread lockdowns are not entirely a thing of the past.

Canadian Outlook

The full effects of Omicron will weigh heavily on Canada’s economy during the first months of 2022. So far, policy-makers are relying on accelerated vaccination efforts and reduced capacity limits, and less so on lockdowns and full closures, to contain this latest threat. But that could change if conditions worsen.

At this stage, a COVID-weary public is far less tolerant to the force of regulation—especially over the holiday season. If there is anything to hope for in the latest wave, it is that its rapid onset will be followed by an equally rapid easing. The big question is how the health system will handle a surge in hospitalizations, which looks certain to occur even if the galloping new variant produces less severe outcomes than previous versions.

Key Findings:

  • COVID’s most contagious wave yet is hindering Canada’s economic recovery. The response by governments and the general public will dampen activity in consumer services early in 2022.
  • Labour markets have largely recovered from the pandemic, although productivity is a concern. The unemployment rate has returned to it’s pre-pandemic level below 6.0%, but skill mismatches and labour shortages are hurting potential output.
  • Easing government stimulus measures and better-than-expected revenues are quickly paring government deficits. But accumulated government debt remains a long-term issue, particularly at the provincial level.
  • Supply chain issues and resulting inflationary pressures are lasting longer than expected, prompting central banks to speed up their timetables for rate hikes in 2022.

Source: Confrence Board Of Canada
Source: Conference Board Of Canada