December retail sales down 0.5% in Canada
Black Friday, gift-card growth skew statistics, economist says
December’s retail sales figures released Wednesday by Statistics Canada aren’t as bad as they look, according to one of Canada’s leading economists.
“We think there is a serious issue with how Statistics Canada seasonally adjusts the figures for December,” said Douglas Porter, chief economist at BMO Financial Group.
According to StatsCan, retail sales decreased 0.5 per cent in December over November — a decline that followed four consecutive monthly increases in Canadian retail sales.
“The rising popularity of Black Friday is pulling a lot of sales into November that used to happen in December,” Porter said. “A bit more of a long-standing issue is the increasing use of gift cards, which only get counted when the gift cards are redeemed, so that is probably delaying some sales out of December into the early months of the next year.”
Also, a smaller share of Canadians celebrate Christmas than 10 or 20 years ago, Porter pointed out.
“StatsCan just can’t adjust their seasonal adjustment figures quickly enough to take advantage of the changing landscape.”
Porter said unadjusted retail sales hit a historic high of $50 billion in December and the volume of retail sales was up 3 per cent from a year ago.
“It’s not as if Canadians stopped shopping,” Porter said.
Annual reviews are conducted into the ways in which the data is assessed and Statistics Canada is always updating and looking at better ways to report, said Statistics Canada analyst Jason Aston.
“You need at least three years to understand if it’s seasonal,” he said, adding that new factors, such as Black Friday sales, have been added to the mix.
In Wednesday’s report, the government agency said lower sales were reported in nine of 11 subsectors, representing 82 per cent of retail trade.
Among the subsectors, sales at motor vehicle and parts dealers were down 0.9 per cent. Lower sales at new-car dealers accounted for most of that decline, more than offsetting gains in sales at automotive parts, accessories and tire stores.
Sales at clothing and clothing accessories stores decreased 3.7 per cent, with jewelry, luggage and leather goods stores posting a decline of 12.4 per cent.
Craig Alexander, senior vice-president and chief economist with the Conference Board of Canada, predicted improvements for 2017.
“As economic growth improves, job creation continues and incomes rise at a modest pace, we should see moderate gains in retail spending this year,” according to Alexander.
The Statistics Canada data reflects the mixed bag of earnings reported by retailers in Canada and the U.S. this year, with Canadian Tire reporting strong holiday sales, Nordstrom reporting overall sales increases but a decline in profit on sales and Indigo reporting an increase in revenue, based on its new, larger offering of general merchandise. Macy’s meanwhile continues to close stores in the U.S. as it predicts falling sales in 2017.
Hudson’s Bay Company reported a slight decrease in comparable sales for the nine weeks ending Dec. 31, along with lower profits due to promotional activity.
Retail consultant Ed Strapagiel said the overall increase of 3.7 per cent in Canadian retail sales in 2016 was better than the gain of 1.7 per cent in 2015, not as good as the 4.6 per cent increase in 2014 and in about the same ballpark as the 3.2-per-cent growth in 2013.
“In short, 2016 was about an average year for current times, which however represents a good recovery from a weak 2015,” said Strapagiel.
He pointed out that e-commerce accounted for 3.4 per cent of total retail sales in December 2016, a high for the year. The second-highest month was November at 3.07 per cent. “It appears that online shopping is a way of beating the crowds at stores and malls during the holidays.”