‘Retail has nine lives’ in Canada as 2023 consumer spending strong — for now: report

Retail gross sales progress in Canada is constant to outperform a lot of the world to date this 12 months, an indication of the continued resiliency of Canadian buyers regardless of increased inflation and recession predictions, a brand new report has discovered.

The Colliers 2023 Retail Outlook mentioned shoppers are nonetheless spending, although retail gross sales have cooled barely from final 12 months when costs spiked and rates of interest started their meteoric ascent.

Canadian retail gross sales climbed 2.4 per cent in March in contrast with the identical month a 12 months earlier, outperforming most developed markets around the globe, the Colliers report famous.

In comparability, U.S. retail gross sales edged up just one.6 per cent whereas dropping within the U.Ok., France and Germany, the report mentioned.

Still, new retail gross sales figures to be launched by Statistics Canada this week may present indicators of softening client spending and demand as borrowing prices rise and the labour market weakens, economists predict.

“Consumer spending was surprisingly resilient early in 2023, with a 5.7 per cent annualized increase in the first quarter,” Royal Bank of Canada assistant chief economist Nathan Janzen and economist Carrie Freestone mentioned in a consumer be aware on Friday.

Yet a lot of that enhance got here from robust spending in January, and more moderen month-to-month readings have been softer, they mentioned.

“We continue to expect spending to flag over the second half of this year, even with surprising resilience year-to-date,” they mentioned.

Within Canada, retail gross sales have been strongest in areas with a decrease price of dwelling, the Colliers report mentioned.

Sales have been highest in provinces that recorded a major inflow of Canadians from different components of the nation through the pandemic, it mentioned.

“The tremendous growth in Alberta and muted performance of Ontario reflects significant interprovincial migration, with a record high level of leavers from Ontario, and a record high level of arrivals in Alberta,” the report mentioned.

“The least affordable regions saw the smallest gains (or losses) in retail sales, while the most affordable regions saw growth.”

Overall, Canada’s robust inhabitants progress in comparison with different developed international locations has continued to behave as a tailwind for retail gross sales in Canada, the report mentioned.

Meanwhile, demand for journey, hospitality and leisure has been a key driver of gross sales, the Colliers report famous.

“The appetite for experience is still very strong,” mentioned Adam Jacobs, senior nationwide director of analysis with Colliers Canada.

“We were all locked down for years and there’s absolutely still record-high demand for bars, sports, entertainment, travel, hotel rooms and plane tickets.”

Retail rents have reached all-time highs as renewed leasing demand, low emptiness charges and a scarcity of recent developments has funnelled demand to current procuring centres, the report discovered.

Despite the high-profile shuttering of U.S. retailers akin to Bed Bath and Beyond and Nordstrom, the vacant house has been quickly absorbed in most markets, it mentioned.

“Retail has nine lives,” Jacobs mentioned. “There’s a lot of focus on some big store closures in Canada, but if we zoom out and look at the overall nationwide trends, those are positive.”

Statistics Canada is predicted to launch its newest retail commerce information for April on Wednesday.

The Conference Board of Canada mentioned in a report launched final week that its index of client spending confirmed a spending pullback within the first week of April, however regular progress for the remainder of the month.

“Every region’s consumer spending index increased from last month’s scores,” the report mentioned. “Alberta led the pack with an increase of 4.3 points in its monthly average. The lowest increase was in Quebec, at 0.5 points.”

The Conference Board added: “The general increase could indicate that people believe influences on financial burdens such as interest rate hikes have peaked, allowing them to commit more toward purchasing rather than saving.”

Indeed, that resilience was cited by the Bank of Canada in elevating its benchmark rate of interest to 4.75 per cent earlier this month, RBC economists say.

This report by The Canadian Press was first revealed June 19, 2023.