E-Sight January 22: A retail party in November followed by a hangover in December

Canadian retail sales growth picked up in November 2020, rising by 1.3% to $55.2 million. The acceleration in sales was particularly welcome as it came after two months of more modest gains. The pattern of retail spending in November suggested Canadians were spending more time at home and were gearing up for stay-at-home holidays in December.

Food and beverage stores saw the biggest monthly increase in sales relative to other spending categories, growing 5.9% in November. Within this category, supermarkets and grocery store sales rose 6.5%, with beer, wine and liquor store sales following closely with 6.1% growth.

Canadians scaled back their purchases of cannabis, with cannabis store sales down 3.2% in November. This represents the first drop in cannabis sales since the height of the pandemic in April 2020. However, year-over-year growth remained strong at 91.1%.

With food, liquor and cannabis plentiful, the last thing needed to get this party going was presents, and online retailers were prepared to oblige. Retail e-commerce sales accounted for 7.4% of total retail trade (unadjusted) in November, representing its largest share since May 2020. The share of e-commerce sales rose 2.0 percentage points since October, and 3.0 percentage points compared to November last year. Shoppers this year were encouraged to buy holiday presents early to avoid shipping delays caused by COVID-19 restrictions. Retail e-commerce sales themselves were up 75.9% year-over-year in November. And, this number is understated because it can miss some sales from online retailers abroad that are not part of the survey.

Many spending categories this month weren’t invited to the party. Motor vehicle and parts dealers fell 0.9%, the first decline it saw since April. Gasoline station sales fell again this month by 1.6%, and sales were down 2.2% in volume terms. Another category that suffered this month was Clothing and clothing accessories stores, with a decline of 3.0% compared to October. These are all categories adversely affected by increased work from home.

While we are waiting for December’s sales numbers to round off the last quarter and the year, StatsCan is already predicting a retail hangover from the party in November, with an advanced estimate of a 2.6% decline in sales in December. As the holiday season hit, we saw increased government restriction measures across the country in anticipation of holiday gatherings. Rising COVID-19 cases and extended shutdowns hampered retail sales in the final month of 2020, and the weakness is likely to extend into early 2021. Eventually, declining health risks and vaccination will bring about a return to in-person shopping, but this will take some time.

Categories: E-Sight, Economics

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