Cautious consumers push retail sales to a six- month low
Weakness in consumer spending became more apparent in June as retail sales in B. C. fell one per cent from May to $ 5.09 billion, marking the lowest level and largest monthly decline since December.
General economic uncertainty, lower consumer confidence and weak housing markets likely kept buyers from opening up their wallets, leading to slightly negative trends in current- and constant- dollar retail sales, despite ongoing population growth.
Changes to duty- free allowances have also made crossborder shopping in the U. S. more compelling, which may have contributed slightly to the weakness.
Recent sales weakness has narrowed year- to- date growth to 4.8 per cent, down from 5.2 per cent in May. Growth has been led by Metro Vancouver ( 6.6 per cent), while the rest of the province was up only 3.2 per cent. Despite the gains, monthly sales trends outside Metro Vancouver were negative, while sales within the region showed signs of a top.
Central 1 forecasts annual retail sales growth of 4.9 per cent this year and a more modest 3.9 per cent gain in 2013.
Most retail sectors have recorded decelerating growth or declining sales trends in recent months. Negative trends have been recorded by retailers of electronics and appliances, motor vehicles and parts, and general merchandise sectors. In contrast, relatively strong sales growth has been observed in the home furnishing sector, but these gains could prove to be temporary given ongoing weakness in housing markets.
Declining gas prices also put downward pressure on retail sales volume. This decline is positive as it allows consumers to shift income away from energy costs towards other goods and services.
The elevated Canadian dollar and lower U. S. prices have been an ongoing challenge for retailers as more Canadians flocked across the border for deals. Corresponding with the appreciating Canadian dollar, and weak U. S. economy/ low prices, day- trips ( via auto) by Canadians returning through B. C. have more than doubled since 2008 to more than 850,000 ( seasonally- adjusted) trips per month in 2012, while overnight stays have increased by more than 20 per cent to more than 240,000 visits.
While not all this travel is by B. C. residents or necessarily shopping- related, it is a pretty good bet that a substantial portion is, representing a further
Changes to duty- free allowances effective since June 1 will generate more crossborder shopping and more competition for Canadian retailers.
leakage of potential domestic sales to the U. S.
Changes to duty- free allowances effective since June 1 will generate more cross- border shopping and more competition for Canadian retailers. Canadians returning from the U. S. after 24 hours can purchase up to $ 200 of duty- free goods, while those returning after 48 hours can re- enter with up to $ 800 worth of goods, double the previous limit. This makes cross- border purchasing of bigger ticket items more likely.
A 16 per cent monthly gain in the number of overnight travellers ( by automobile) in June suggests that at least some consumers have taken advantage of the new rules by heading south — Canadian retailers beware.
International visits rebound slightly in June, but the trend remains weak.
While tourism abroad has ascended to new heights in light of the strong Canadian currency and relatively healthier economy, international visits to B. C. have continued to stumble near recessionary lows. Factors boosting Canadian travel abroad have also hampered a recovery in the flow of international visitors to B. C.
International tourist entries rebounded slightly in June following a 2 per cent decline in May to reach a seasonally adjusted 350,700 visits, up 1.3 per cent from May. Comparable growth was observed for both overseas and American visitors. Despite remaining near the top- end of post- 2010 Olympic range, total international tourism levels continued to trend well below average levels observed in the mid- 2000s. The pace of U. S. visits is only about 80 per cent of 2005 levels, while overseas visits are about 95 per cent.
Through June, total international tourist visits to B. C. reached 1.82 million people, up 2.1 per cent from same- period 2011. While the flow of visitors is comparable to the last few years, it remains more than 10 per cent below mid- decade levels.