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| Retail sales take biggest tumble since 1991
OTTAWA — Canadians felt the bitter chill of recession this winter as massive job losses and growing economic uncertainty drove them to tighten their belts, sending retail sales plunging by the most in nearly two decades.
But while many analysts say things will get worse before they get better, consumers appear to be shaking off some of the negative news and focusing on a recovery they feel might not be far away, according to another report released Monday.
Retail sales in December fell 5.4 per cent — month-to-month on a seasonally adjusted basis — to $33 billion, Statistics Canada said Monday, which was more than the three per cent drop economists had expected.
In November, sales were down 2.4 per cent. That had been the biggest monthly decline since a 4.5 per cent drop in January 1998, “when an ice storm crippled part of the country,” the federal agency said.
“With the 129,000 jobs lost in (January), it was clear that Canadians felt on edge and were not taking advantage of the discounts and sales as retailers had hoped,” said Charmaine Buskas, senior economics strategist at TD Securities.
Adding to the appearance of a general economic crisis was the plunge of stock markets around the world on Monday. Here in Canada, the Toronto Stock Exchange’s main index fell 3.8 per cent to 7,647.67, the lowest close in more than five years. In the U.S., the S&P 500 index fell 3.5 per cent Monday to 743.33, the lowest in almost 12 years.
Retail declines in December were recorded across all sectors, with the automotive industry accounting for three-quarters of the drop. Excluding the auto sector, which includes sales of vehicles, parts and fuel, retail sales were down a relatively moderate 1.8 per cent in December.
In terms of volume, which strips out the effect of falling prices, sales were down 4.1 per cent mainly due to a big decline in vehicle purchases at new-car dealerships.
The December retail plunge was the biggest since a 7.6 per cent drop January 1991, when the GST was introduced and Statistics Canada altered its methodology for calculating retail activity.
“Retailers knew it was going to be a tough holiday season, but (the December) results are somewhat softer than anticipated,” said Mark Beazley, spokesman for the Retail Council of Canada. “Most of our members are expecting a pretty tough year, forecasting declining sales (year-to-year) in the first half, flat sales through the third quarter and maybe some marginal growth to end off the year.”
Douglas Porter, deputy chief economist at BMO Capital Markets, said that “while the decline remains a bit less extreme than U.S. trends, there is little debate that Canadian consumers are also battening down the hatches to ride out the economic storm.”
Still, consumer confidence — badly shaken by the financial crisis, falling house prices and depleted retirement savings — actually rose in the period from December to February to 67, the highest the index has been since August 2008, polling firm Harris/Decima said.
Although still off the highs of recent years, the rebound shows "some Canadians appear to be seeing light at the end of the economic tunnel, as both the one-year and five-year outlook results have improved this quarter,” said Jeff Walker, Harris/Decima senior vice-president.
"The roller-coaster ride may not be over yet, but the data suggests many feel that we have hit bottom, and will gradually move upward from here."
Barry Nabatian, economist and general manager of Ottawa’s Market Research Corp., said December’s retail levels might prove to have been the bottom of the cycle. However, he said figures for the early part of 2009 will not be much better, if at all.
He said the retail sector, and the economy in general, is not likely to see much improvement until it’s apparent that dollars from government-stimulus programs in Canada and the U.S. are flowing in a useful way.
“I think as soon as some of the money is spent, you will see some consumer confidence,” he said.
Alberta — where the government projected 15,000 would lose their jobs this year as the oil-rich province slips into recession — saw the biggest retail drop, at 6.2 per cent.
“Sales in this province have been generally weak throughout 2008 after reaching a plateau in 2007,” the agency said.
Ontario posted a six per cent decline, while in Saskatchewan sales fell 5.8 per cent, and British Columbia was down 5.6 per cent.
“The impact that (December’s retail) data has for fourth-quarter GDP is pretty sizable,” Buskas said, adding that the economy may have contracted by between three and four per cent in the quarter — much more than the Bank of Canada’s forecast of a 2.3 per cent decline.
The retail numbers add further pressure on the Bank of Canada to cut its key lending rate — already at an all-time low of one per cent — to encourage more spending by consumers to help pull the country out of recession. The central bank is widely expected to lower its benchmark rate by another 50 basis points at its March 3 meeting.
Statistics Canada reported last week that consumer prices rose just 1.1 per cent in January, reinforcing the view that inflation is no longer a major concern and the focus should now be on stimulating the economy, which entered recession in the final quarter of 2008.
The most recent reading of the economy showed it contracted 0.7 per cent in November after posting negative growth 0.1 per cent in October. The International Monetary Fund expects Canada’s economy to decline by 1.2 per cent this year, much worse than the 0.8 per cent shrinkage projected by the federal government in its Jan. 27 budget.
Retail sales percentage change (December from November):
Newfoundland and Labrador -4.5
Prince Edward Island -4.5
Nova Scotia -4.4
New Brunswick -3.2
Quebec -4.4
Ontario -6.0
Manitoba -3.2
Saskatchewan -5.8
Alberta -6.2
British Columbia -5.6
Yukon -6.5
Northwest Territories -1.5
Nunavut -0.7
Canada — 5.4
Source: Statistics Canada
© Copyright (c) Canwest News Service
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