Retail trade

For the first time in five months, consumers reduced their spending in retail stores in May. Retailers sold $30.4 billion worth of goods and services, down 1.3% from April, when sales rose 1.5%.

Although five out of the eight retail sectors posted sales declines, weak auto sales were responsible for the bulk of May's setback. Excluding sales by dealers of new, used and recreational vehicles and auto parts, which account for about one-quarter of the retail industry, retail sales fell by only 0.4% in May. This followed a 0.8% gain in April.

Once prices are taken into account, constant dollar retail sales declined 1.1% in May after rising 1.3% in April.

Despite May's decline, retail sales have been quite strong since the start of the year. Cumulative sales in the first five months of 2005 stood at 6.9% above those in the same period of 2004. This growth rate outperformed the year-to-date increases seen in the same five-month period of the previous seven years. Moreover, May's decline marked only the third monthly sales decline posted by retailers since the start of 2004.

In May, consumers reduced their spending by at least 1.0% in half of all retail sectors: automotive (-3.5%), furniture and electronics (-2.2%), clothing (-2.0%) and the general merchandise sector (-1.0%). On the other hand, food and beverage stores enjoyed a 1.3% sales gain after two months of stagnation.

Sales movements were much less pronounced in the remaining retail sectors in May. Sales fell slightly in the miscellaneous sector (-0.2%), while advancing moderately in the pharmacies (+0.4%) and the building supplies (+0.2%) sectors. The miscellaneous sector includes retailers such as sporting goods, hobby, music and book stores.

Auto sector drives down sales

Sales in the automotive sector fell 3.5% in May, completely offsetting April's 3.2% gain. Within this sector, new car dealers (-5.1%) and gasoline stations (-2.6%) suffered sales declines in May, while used and recreational motor vehicle and parts dealers (+1.8%) enjoyed higher sales for a second consecutive month.

After posting a healthy 4.0% sales gain in April, cutbacks on financial incentives offered by some auto manufacturers were partly behind the significant sales decline suffered by new car dealers in May. Despite May's setback, sales at new car dealers have generally been increasing since the start of 2004, after a period of declines in the second half of 2003.

For the first time in five months, lower gasoline prices at the pump (down 3.1%, according the Consumer Price Index) reduced the value of sales at gasoline stations in May. Nevertheless, sales at gasoline stations have generally been rising since the middle of 2003 on the strength of higher prices.

Declines in all categories of retailers in the furniture, home furnishings and electronics sector led to a 2.2% sales retreat in the overall sector in May. Home electronics and appliance stores, which account for about 40% of all sales in the sector, experienced their first sales decline in six months. These retailers led their sector counterparts on an annual basis with sales up 9.8% in May compared with the same month last year. Home electronics and appliance stores have experienced rising sales since the middle of 2004, following a period of essentially flat sales in the previous 12 months.

Shoppers reduced their spending by 2.0% in clothing and accessories stores in May, the first monthly reduction in six months. Sales in clothing and accessories stores have generally been increasing since the spring of 2003, with the exception of a short pause in the second half of 2004.

General merchandise stores posted their second consecutive monthly sales loss in May (-1.0%). Within this sector, lower sales were reported by department stores (-0.8%) and by other general merchandise stores (-1.2%). In spite of recent declines, retail sales in the general merchandise sector were still essentially at the record levels reached in early 2005. Previously, general merchandise stores had enjoyed a 5.3% sales gain in 2004, their strongest annual performance in five years.

After two months of stagnation, food and beverage store sales increased 1.3% in May, thanks to higher sales in each store category included in the sector. Despite the lack of growth in March and April, cumulative sales in the first five months of 2005 were 6.2% above those in the same period in 2004. About one-third of that growth rate was caused by higher prices.

Retail sales down across the country, except in Saskatchewan and Alberta

Retail sales fell in all provinces in May, except in Saskatchewan (+2.8%) and Alberta (+1.0%). Reduced spending across the country pushed down retail sales by more than 1.0% in seven provinces.

Retailers in Saskatchewan and Alberta, who have enjoyed five consecutive months of growth, have seen their sales jump by slightly more than 10% since the end of 2004.

Consumer spending in Saskatchewan retail stores has been on the rise since the fall of 2004, after remaining essentially flat in the summer and spring of that year. In Alberta, retail sales have been increasing rapidly since the start of 2004, rising by an astonishing 22% over the period.

Related indicators for June

Total employment advanced for a third consecutive month in June (+0.1%). This sequence of increases led to a 0.5% growth rate in the second quarter, a rate three times larger than the one observed in the first quarter of 2005. Furthermore, the unemployment rate fell to 6.7% in June, representing one of the lowest rates seen in almost three decades.

The number of housing starts increased 7.2% in June compared with the previous month, according to the Canada Mortgage and Housing Corporation. While housing starts are returning to the record highs of 2004, the overall activity on the existing housing market has already surpassed levels seen in the previous year. The Canadian Real Estate Association indicated that 179,759 homes changed hands in the first six months of 2005, an increase of 1.1% from the same period of 2004.

The number of new motor vehicles sold in June has increased by about 7% from the previous month, according to preliminary results from the auto industry.

Available on CANSIM: tables 080-0014 to 080-0017 and 076-0005.

Definitions, data sources and methods: survey numbers, including related surveys, 2406 and 2408.

The May 2005 issue of Retail Trade (63-005-XIE, $18/$166) will soon be available.

Data on retail trade for June will be released on August 22.

For more information or to order data, contact Client Services (1-877-421-3067; 613-951-3549; retailinfo@statcan.gc.ca). For analytical information, or to enquire about the concepts, methods or data quality of this release, contact Paul Gratton (613-951-3541), Distributive Trades Division.