Retail trade

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Retailers began 2008 on a strong note, as sales increased 1.5% in January to an estimated $35.8 billion. This was the third consecutive month of strong gains in retail sales. Following moderate sales in mid-2007, retail sales have returned to the rapid growth that began in 2004.

Although retail sales in all sectors were up, five of them posted increases of more than 1.0% in January. Building and outdoor home supplies stores led the way at 3.2%, followed by clothing and accessories stores (+2.9%), furniture, home furnishings and electronics stores (+2.5%), the automotive sector (+1.8%), and general merchandise stores (+1.1%).

Food and beverage stores (+0.9%) also experienced sizeable growth in January. Pharmacies and personal care stores (+0.3%) and miscellaneous retailers (+0.1%) posted fairly stable sales.

On the strength of these increases, total retail sales, excluding sales by dealers of new, used and recreational vehicles and auto parts, rose 1.3% in January, the second strongest increase in eight months.

When price changes are taken into account, retail sales in constant dollars rose 1.0% in January.

Passenger cars dominate new car sales

Higher sales by new car dealers (+2.6%) in January can largely be attributed to buyers' enthusiasm for passenger cars. The additional discounts granted in connection with new Canadian prices, the one percentage point reduction in the goods and services tax introduced on January 1, 2008, and the more advantageous financing rates seem to have paid off.

According to the New Motor Vehicle Sales Survey, the number of passenger cars sold in January jumped by a staggering 16.2% compared with December 2007. The effect of the strong increase in the number of passenger cars sold on overall dealers' sales was mitigated by the slow growth in the number of trucks sold (+0.5%).

Used and recreational motor vehicle and parts dealers saw their sales increase for a third consecutive month (+1.1%) after five months of decreases or stagnation.

The increase in sales by gasoline stations (+0.8%) could largely be attributed to the 1.9% rise in gasoline prices, as reported in the Consumer Price Index. Sales at gasoline stations have generally been on the rise since the decline observed in September 2006.

An outstanding start to the year for many retailers

The exceptional weather fluctuations in December and January, the one percentage point reduction in the goods and services tax, and practices regarding the use of gift cards seem to have launched 2008 off to a good start for many retailers.

The strongest increase in retail sales in January was observed at building and outdoor home supplies stores (+3.2%), representing the second highest rate of growth since May 2007. This increase can primarily be attributed to a 2.3% rise in sales at home centres and hardware stores, reversing the downward trend that characterized the second part of 2007. Sales by specialized building materials and garden stores were up by 7.0% following two consecutive months of decreases.

The clothing and accessories stores sector followed closely, with a substantial increase in sales in January (+2.9%) that completely offset the 2.6% drop in sales in December. January's increase was largely driven by strong sales by clothing stores (+4.3%), which showed renewed vigour in the wake of a 3.0% drop in December. Shoe, clothing accessories and jewellery stores witnessed a second consecutive decrease in sales (-1.8%).

Sales in the furniture, home furnishings and electronics stores sector were up sharply in January (+2.5%) after falling in December. All retail groups in this sector posted good sales levels. Furniture stores led the way with a 3.5% increase, followed closely by home furnishings stores (+3.1%) and computer and software stores (+3.1%). For home furnishings stores, this was the second straight monthly increase in sales of more than 2.0% and represented the continuation of a prolonged upward trend. Lastly, sales by home electronics and appliance stores were up by 1.3%, the third increase in four months.

In January, general merchandise stores (+1.1%) posted their fifth sales increase in six months. The rise in sales in this sector coincided with higher sales by clothing and accessories stores (+2.9%) in January. Continuing reductions in clothing prices in recent months seem to have contributed to the upward sales trend in this sector. Sales of clothing and accessories accounted for more than 15% of sales by general merchandise stores, according to the Quarterly Retail Commodity Survey.

All retail groups in the food and beverage stores sector increased their sales. The sales resurgence at beer, wine and liquor stores (+3.1%), the second highest increase since early 2007, was the primary reason for the sector's gain. Supermarkets saw their sales rise by 0.4%, the fifth increase in six months, while sales at convenience and specialty food stores edged up 0.3% in January.

Retailers in Central and Atlantic provinces picked up the pace in January

Most provinces posted retail sales growth in January. The strongest monthly increases were observed in the Atlantic provinces of Nova Scotia (+4.6%), New Brunswick (+3.7%), Prince Edward Island (+3.4%), and Newfoundland and Labrador (+3.3%). For the Atlantic provinces as a whole, this represents a resurgence in sales after two consecutive monthly declines. Sales in these provinces were strongly influenced by the predominance of passenger cars in new car sales.

Sales in Quebec, another market in which passenger cars dominate new car sales, climbed 2.7% in January, the fourth monthly increase in a row.

Sales in Manitoba (+1.8%) continued their growth, with a fifth consecutive monthly gain of at least 1.0%. Sales in Ontario (+1.6%) were up for the fourth time in five months.

Following an increase in December that saw an end to the stagnation observed in the previous six months, British Columbia experienced a slight 0.2% decrease in retail sales in January. Sales in Saskatchewan and Alberta were relatively stable. New car sales in those provinces are generally dominated by trucks.

All three territories saw higher sales, particularly in Nunavut (+5.4%), which posted its largest increase since July 2006. The Common Experience Payment to former students of Indian residential schools and to their families may have influenced sales.

Related indicators for February

Job growth continued in February, with an estimated increase of 43,000 jobs, bringing Canada's employment rate to an unprecedented high (63.9%). For the second month in a row, the unemployment rate was 5.8%, the lowest level in 33 years.

Preliminary data on automotive industry sales indicate that the number of new cars sold in February decreased, mainly as a result of truck sales.

According to the Canada Mortgage and Housing Corporation, the seasonally adjusted annual number of housing starts in Canada rose from 222,700 in January to 256,900 in February, representing a substantial 15.4% increase.

Available on CANSIM: tables 080-0014 to 080-0017.

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

The January 2008 issue of Retail Trade (63-005-XWE, free) will be available shortly.

Data on retail trade for February will be released on April 25.

For more information or to order data, contact Client Services (613-951-3549; toll-free 1-877-421-3067; retailinfo@statcan.gc.ca). For analytical information, or to enquire about the concepts, methods or data quality of this release, contact Claude Bilodeau (613-951-1816), Distributive Trades Division.

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