Canadian Nominal Retail Sales Snap Back As Real Sales Lag

Canadian sales patterns have become confusing. While its nominal patterns look quite upbeat, real sales have slowed and are declining in the current quarter-to-date. Nominal sales are quite mixed with large blocks of sales showing recent persistent declines.

Canadian retail sales rose by 0.9% in April after a 0.8% decline in March. However, after a more-or-less flat year for sales (ex-autos) in 2015, sales are on the rise and showing consistent expansion in 2016. Despite the fact that car sales, supermarket sales and clothing store sales each show declines over three-months and six-months, overall sales still are advancing on three-month and six-month horizons.

While sales have slowed over six-months and three-months compared to 12-months, there is no clear pattern of deceleration.

In the quarter-to-date, these same patterns play out. Overall nominal retail sales gains are strong, but sales of new car dealers, supermarkets and clothing stores are falling.

Inflation adjusted or real retail sales were flat in April after a 1% decline in March. Sales also are weaker over three-months and six-months compared to their 12-month pace, but sales are still growing on all horizons. In the quarter-to-date period, real retail sales are contracting.

The Canadian economy has been through some rough times with the energy and commodities businesses under such tremendous pressure in the wake of weak prices. Those price pressures have only begun to release in the past several months. On top of that, one of Canada's oil-producing areas has been hit by massive wildfires causing extreme disruption not just to the industry but to an entire town. It is hard to gauge the impact of all these things on the economy and to balance them fairly. The weakness in real terms is entirely understandable given the problems Canada has been through. But with rebuilding from the wildfire able to continue and with oil prices rebounding, Canada is in a position to build on an expanding base. While retail sales were weaker over three-months and six-months than over 12-months, they were still expanding. The only fly in the ointment is the recent decline in real sales on a quarter-to-date basis.