Canada Retail Sales Strong; Jewelry Demand Positive

Canada Retail Sales Strong; Jewelry Demand Positive
IDEX Online, Israel 
(June 29, ’06, 10:06 Ken Gassman)
 

Canadian retail sales, including fashion accessories such as jewelry, posted a solid gain in April, 2006. Fueled by low unemployment and strong economic growth, Canadian consumers continue their shopping spree, which began late last summer. The graph below illustrates total retail sales gains (ex-auto) as well as mall jewelry sales since mid-2005.

Sales by Sector: Automobile Sales Led the Way Six out of eight retail sectors experienced sales gains in April, with the automotive sector leading the way. “Miscellaneous retailers,” which include retailers such as office supply stores, sporting goods stores, and hobby, music and, book stores, also posted a very strong gain. The other sectors, including jewelry, posted gains, but modestly below the national average.
 
Consumer spending on clothes and accessories – including jewelry – remains robust; this sector has posted solid gains in nine of the past 10 months. The graph below summarizes Canadians’ spending on jewelry and other fashion items. 

Consumer spending in building and outdoor home supplies fell in April, ending a five-month streak of sales gains. The first three months of this year were exceptional for this retail sector, and the quarterly gain was the strongest in over two years. Despite being the fastest growing sector in Canadian retailing for the past four years, building and home supply stores have seen their annual rate of growth slow recently. In part, this is due to a series of interest rate increases that the Bank of Canada has recently delivered. Based on April’s sales, consumers are responding to these higher interest rates with slowing consumption of home-related goods as well as some other durable categories.
 
Other Factors Affecting Retail Demand
Gasoline prices rose by 13.5 percent in April, the second largest gain in 23 years. So far, however, consumers seem to be shrugging off those elevated prices.
 
The number of people employed increased by an estimated 97,000 in May, driving the unemployment rate down 300 basis points to 6.1 percent, the lowest level since December 1974. All of May’s employment progression was in full time jobs (+151,000), the largest increase on record.
 
Housing starts continued their decline; they have been on a downward slope for the past four months. Housing activity is being dampened by higher interest rates.
 
The average hourly wage in May was up 3.8 percent from the same period last year. This compares favorably to a 2.4 percent rise in the Consumer Price Index.
 
Sales in the Provinces
The Prairie Provinces have been buoyed by the automotive sector. In Alberta, retail sales jumped by 17.4 percent versus April 2005. Employment growth in Alberta has outpaced the rest of the country over the past 12 months, as consumers have migrated toward the province’s hot labor market. Alberta’s net migration was over 16,000 in 2005, more than double British Columbia’s net migration of almost 7,500 people. All other provinces experienced negative net migration in 2005. Over the past 12 months, the provincial hourly wage growth was 6.8 percent in Alberta, driven by a tight labor market. Given these strong fundamentals, it is no surprise that consumers continued to spend their money on new cars as well as used autos and recreational vehicles.
 
The growth of sales in neighboring Saskatchewan has generally followed Alberta’s lead.
 
Growth in the Atlantic Provinces was mainly driven by retail consumption – especially new cars – in Newfoundland and Labrador.
 
Retail sales in Quebec and Ontario also were up moderately.