Canadian Retail Sales: slowing and heavily dependent on Autos

Retail sales fell 1% in cash terms in March on February and by 1.3% in volume terms.  Over the year volume (real) retail sales grew 1.77% and by cash (nominal) 3.17%.

In real terms real volume based retail sales look to be in a declining growth trend (note the smoothed data line) of lower highs and lower lows:

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Across Canada we see weakness in Alberta and relative strength in Ontario over the year in nominal terms:

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But monthly rates of change are slowing considerably from a peak in mid 2015:

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If we just focus on annual data for Canada we see a very strong out of trend upward move

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But this is primarily from motor vehicles and parts sales:

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If we take away motor vehicles and parts and we see a flat retail sales picture (index January 2014 100):

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The disparity between retail sales and retail sales ex motor vehicle and parts sales has not been this big for years:

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But the trend is bigger if we just compare MVP sales to retail sales ex MVP:image

We can see this disparity below: the largest since the early 1990s, itself a rebound from the recently ended recession, so the current strength is significant.image

We can see that motor vehicle and parts sales has contributed close to 60% of retail sales over the last three ears:

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So how does motor vehicle and part sales compare with wage growth?  If we look at cumulative data, in this case annualised rates of change over rolling 5 year periods, we see that motor vehicle and parts sales have well exceeded increases in hourly wage growth:

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Deeply disturbing underlying trends in Canadian retail sales data

Looking at new Canadian retail sales data one would be forgiven for thinking that all is well on the retail front: yes we had a downward blip, but we have stabilised and things seem mildly resurgent in the year to August.

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But just as in the US, Auto sales appear to be driving the headline growth rate, which if you have been keeping an eye on my US data missives should give pause for thought:

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So is this not necessarily a good thing?  We know that consumer debt has been on the rise and now stands at historical levels:

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And recent independent commentary has also pointed out the large increase in auto related debt: When will Canada’s subprime car loan bubble burst?

But the clincher is the relationship between sales of motor vehicles and parts and wage growth: the following chart looks at annual rates of changer over rolling 5 year periods to average out short term ups and downs, to get a better look at the strength of the data relationships:

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As we can see, auto related spending has taken a manifold hyper leap relative to the rate of change of employee wage growth.   This is all deeply disturbing. 

Retail sales: Ontario and Toronto, the fly in the ointment!

Canada’s retail sales jumped 0.7% month on month, but most of the gains were concentrated outside of Canada’s largest province: Ontario retail sales grew 0.06% and have fallen since March by 1.16%.   Retail sales data adjusted for the fact that there were 5 weekends in July 2011 and only 4 in 2012: actual year on year unadjusted data showed much weaker growth.  All data is sourced from Stat’s Can.

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