Ed Strapagiel is a consultant specializing in applied marketing, business development and strategic planning. [Ed Strapagiel's Website]
The latest reports are that retail sales in Canada declined 0.1% in July 2014 versus June, but this could be misleading. The result is based on Statistics Canada's seasonally adjusted data, but the seasonal adjustment factors are estimates. For July, the adjustment factor applied was 5.9%, and even a modest misestimate here could significantly change the end result.
Another way of looking at it is the year-over-year change. July 2014 total retail sales on a not seasonally basis were in fact up 6.6% over July 2013, the highest single month gain in 2½ years. More broadly, for the 3 months ending July total retail was up 5.3% year-over-year, another 2½ year high. Furthermore, the 3-month trend (orange line in the chart above) continues to track above the 12-month trend (green line), indicating increasing retail sales.
Another positive sign is that the Automotive & Related is now much less dominant as the driver of total retail sales gains. Recent improvements are due to the pick-up in the Food & Drug and Store Merchandise sectors.
Food & Drug Stores
Although the numbers are relatively modest, the Food & Drug sector has had sustained retail sales growth in the last few months. The 3-month trend is tracking at a higher level and is pulling up the underlying 12-month trend.
Health & personal care stores (i.e., drug stores) are strong performers in this sector, with retail sales up 6.8% for the 3 months ending July 2014 versus a year ago. Specialty food stores' sales are also increasing at an above average pace, but they account for only a small portion of the dollars in Food & Drug.
Mainstream supermarkets & other grocery stores continue to be one of the slower subsectors in Canadian retail. For the 3 months ending July, year-over-year sales were up 1.3%, well below the overall retail average. This reflects the highly competitive conditions in food retailing.
Retail sales for the Store Merchandise sector were up 5.3% for the 3 months ending July versus a year ago, equal to the overall retail average and a 4 year high. The 3 month trend (orange line in the chart above) still appears to be improving and is pulling up the underlying 12 month trend (green line).
A number of store types are contributing to the improving sales in Store Merchandise. Above average 3-month gains were recorded by other general merchandise stores, sporting goods, hobby, book & music stores, home furnishings stores, and shoe stores.
On the other hand, electronics & appliance stores gained only 0.3% in July, and were down 0.8% on a 3-month basis. Sales at miscellaneous store retailers also declined.
Automotive & Related
Retail sales for the Automotive & Related sector have settled down and the underlying 12 month trend has been flat for several months. Nevertheless, this is still at a level above the overall retail average.
Gasoline stations have had above average retail sales gains for most of the year. In July however, this cooled off to a 4.8% year-over-year gain with moderating pump price increases.
After a dip in June, new car dealers bounced back with an 11.7% year-over-year sales increase in July. On a 3 month basis, their sales are up 7.4%, which is about the range they've been in since early 2013.
The other motor vehicle dealers group (e.g., motorcycles, recreational vehicles, etc.) is the only weak spot in this sector, but it accounts for a small portion of total dollars in Automotive & Related. Retail sales declined 2.6% for the 3 months ending July.
By The Numbers:
For definitions of store types, see Statistics Canada.