Canadian Retail Trade Declines by Most Since 2009 Financial Crisis

Retail sales across Canada dropped by the most since April’s historic lows, falling by 3.4% in December to $53.4 billion. Canadian retailers finished off 2020 1.4% below the previous year’s levels, amounting to the largest annual decline since the 2009 recession.

According to data published by Statistics Canada on Friday, Canadian retail sales suffered their worst month since the extensive economic shutdowns in April. Sales declined in nice of the eleven subsectors, accounting for 83.6% of all retail sales. Core retail sales, which do not take sales by gasoline stations and motor vehicle and parts dealers into account, declined by 4.6% in December, largely due to a drop in sales at general merchandise stores.

For the first time since April, sales decreased across all provinces in December, led by Ontario, British Columbia, and Manitoba. Sales in Ontario fell by 6.5%, as motor vehicle and parts dealers suffered the worst of the decline. In British Columbia, sales declined by 2.2%, meanwhile sales in Manitoba decreased for the third month in a row, falling by 7.2% in December. The sharp drop in sales is largely reflective of the increased public health measures that began in November, forcing the closure of numerous non-essential retailers and restricting the sale of non-essential goods and services.

On the contrary, retail e-commerce sales increased by 69.3% year-over-year, to a new record high of $4.7 billion in December. Comparatively, total unadjusted retail sales rose by 5.9% year-over-year, meanwhile e-commerce contributed to 7.8% of all retail trade in December— the biggest share since May. The surge in e-commerce sales coincided with an equal increase in the number of retailers that reported shutdowns in December.

The Covid-19 pandemic created a significant shift in consumerism, lead by shoppers changing their purchasing habits and retailers adjusting their business practices. Extensive public health measures imposed to mitigate the spread of the virus resulted in temporary store closures and heightened physical distancing measures, all of which modified the way consumers bought goods and services, as well as how they shopped.

As a result, retailers across Canada finished the year off with $606 billion in sales, a decline of 1.4% compared to 2019. This was the largest decline since the 2009 recession, and was largely the result of restrictions imposed on in-person shopping and gatherings. On the other hand, the temporary store closures, coupled with physical distancing measures, gave rise to the retail e-commerce boom, which resulted in a 70.5% increase in e-commerce sales in 2020.

Some of the largest retail sales declines were recorded in the motor vehicle and parts dealers subsector, which fell by 8.8% in 2020, exceeding the subsector’s previous record decline of 6.1% in 2009. Conversely, sales at supermarkets and grocery stores— many of which were deemed essential throughout the pandemic, rose by 11.5% in 2020. A large part of the increase was the result of panic buying at the beginning of the pandemic, that contributed to a record sales surge of 28.7% in March.

As consumers spent more time at home and undertook home improvement activities, sales of building material and garden equipment and supplies surged by 11.4% in 2020. Conversely, as Canadians stayed home, the demand for clothing fell, with sales at clothing and clothing accessories stores declining by 25.8% last year, to the lowest level since 2011.

Information for this briefing was found via Statistics Canada. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.

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