August 11, 2008
Economy at a Glance - August 12, 2008
Retail sales show that motorists are altering their behaviour
Analysts watch retail sales closely because they are a prime indicator of what to expect from consumer spending in the national accounts. In turn, consumer spending comprises between 55% and 60% of total Gross Domestic Product (GDP) in Canada. (The figure is 70% in the United States, due to a lower dependence on foreign trade.)
The first accompanying graph below shows that retail sales growth, on a year-over-year three-month smoothed basis, has been moderating for the past four months. It has now fallen to +3.8%, which is its lowest level since March 2004, four years ago. In terms of actual dollars, the year-over-year retail sales gain was only +2.8%. This was below the latest increase in the all-items Consumer Price Index (CPI), at +3.1% for June 2008.
One of the most interesting results from the retail trade figures pertains to gasoline sales. Gasoline station sales were +2.4% in May versus April, which is a solid increase. However, gasoline prices were +8.8% month over month. The disparity between the two numbers indicates that there has been some adjustment in drivers’ behavior. It would seem that motorists are cutting down on their driving activity, thereby reducing the real volume of gasoline sales.
Construction-related retail sales growth rates (second graph) remain well below most earlier periods, but they are still at solidly positive levels (about 4.0% smoothed). The biggest non-auto hits in the latest month on a year-over-year actual basis came in computer and software stores (-1.4%) and shoe, clothing accessories and jewellery stores (-0.9%). These have both had large price declines of late.
For more articles by Alex Carrick on the Canadian and U.S. economies, visit his blog and Market Insights.
Canadian Retail Sales – Three Months Smoothed
Canadian Construction-related Retail Sales – Three Months Smoothed
*“Year over Year” is the monthly figure versus the same month of the previous year.
Based on latest three-month averages of current dollar adjusted data (and placed in the latest month).
Data source (seasonally adjusted): Statistics Canada/Charts: Reed Construction Data - CanaData.
