Strong retail showing signs of weakening

B.C. retail spending rebounded in September following an August decline, but the trend points to a tempering of activity after a flurry early in the year.

Sales rose 0.4% to a seasonally adjusted $7.11 billion. Year-over-year sales decelerated from 10.4% in August, but remained robust at 9.8% in September. In comparison, national sales rose 0.1% and 6.2% year-over-year.

Like the national performance, stronger gas station sales – which reflected higher pump prices more than consumer demand – supported growth. Year-over-year sales in housing-related sectors also accelerated. Building materials and garden equipment sales were up 29%, furniture and furnishing sales were 2.9% higher and electronics were up 3.8%. In contrast, motor vehicle sales growth slowed (but remained high at 24%), clothing sales were flat and sporting goods sales declined.

Notwithstanding monthly fluctuations, sales have softened since mid-year, coinciding with a period of flatter employment and home sales trends. Excluding auto and gas station sales, declines have steepened in recent months.

Nonetheless, year-to-date sales rose a stellar 9.7% through three quarters and are on track to follow up last year’s 7.4% gain with the strongest performance since 1994. Metro Vancouver sales are up 10%, but the rest of the province (up 9.4%) is not far behind. Low retail price inflation points to real growth of more than 8%.

September international tourism inflows into B.C. accelerated to the highest level since April after sliding in recent quarters. Total tourist visits reached a seasonally adjusted 474,612 persons, up 2.3% from August with gains in both U.S. and overseas visitors.

While the general trend has been negative in recent quarters, tourism remains high with inflows up about 35% compared with five years ago and above Vancouver 2010 Winter Olympics levels. Stronger tourism growth in recent years largely coincided with Canadian dollar depreciation, which has now stabilized at a competitive level but has dampened upward momentum. Other factors supporting elevated tourism levels include higher travel demand from China; removal of visa restrictions for Mexican travellers; and, potentially, a reallocation of global tourism dollars away from the U.S. due to the political climate.

Year-to-date, total international visits rose 3% through September, compared with a 12% pace during the same period last year. Growth in overseas tourism is 6.1% this year; inflows from the U.S. are up 1.4%. •

Bryan Yu is deputy chief economist at Central 1 Credit Union.

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