VANCOUVER, BC, Aug 25, 2012/
Troy Media/ – Weakness in consumer
spending became more apparent in June as retail sales in B.C. fell 1 per
cent from May to $5.09 billion, marking the lowest level and largest
monthly decline since December.
General economic uncertainty, lower consumer confidence and weak
housing markets likely kept buyers from opening up their wallets,
leading to slightly negative trends in current- and constant-dollar
retail sales, despite ongoing population growth.
Changes to duty-free allowances have also made cross-border shopping
in the U.S. more compelling, which may have contributed slightly to the
weakness. Recent sales weakness has narrowed year-to-date growth to 4.8
per cent, down from 5.2 per cent in May.
Growth has been led by Metro Vancouver (6.6 per cent), while the rest
of the province was up only 3.2 per cent. Despite the gains, monthly
sales trends outside Metro Vancouver were negative, while sales within
the region showed signs of a top.
We forecast annual retail sales growth of 4.9 per cent this year and a more modest 3.9 per cent gain in 2013.
Most retail sectors have recorded decelerating growth or declining
sales trends in recent months. Negative trends have been recorded by
retailers of electronics and appliances, motor vehicles and parts, and
general merchandise sectors.
In contrast, relatively strong sales growth has been observed in the
home furnishing sector, but these gains could prove to be temporary
given ongoing weakness in housing markets.
Declining gas prices also put downward pressure on retail sales
volume. However, this decline is positive as it allows consumers to
shift income away from energy costs towards other goods and services in
the economy.
The elevated Canadian dollar and lower U.S. prices have been an
ongoing challenge for retailers as more Canadians flocked across the
border for deals. Corresponding with the appreciating Canadian dollar,
and weak U.S. economy/low prices, day-trips (via auto) by Canadians
returning through B.C. have more than doubled since 2008 to more than
850,000 (seasonally-adjusted) trips per month in 2012, while overnight
stays have increased by more than 20 per cent to more than 240,000
visits.
While not all this travel is by B.C. residents or necessarily
shopping-related, it is a pretty good bet that a substantial portion is,
representing a further leakage of potential domestic sales to the U.S.
Changes to duty-free allowances effective since June 1 will generate
more cross-border shopping and more competition for Canadian retailers.
Canadians returning from the U.S. after 24 hours can purchase up to $200
at the duty-free shop – four-times the previous limit, while those
returning after 48 hours can re-enter with up to $800 worth of goods,
double the previous limit. This makes cross-border purchasing of bigger
ticket items like televisions and other electronics more likely.
A 16 per cent monthly gain in the number of overnight travelers (by
automobile) in June suggests that at least some consumers have taken
advantage of the new rules by heading south – Canadian retailers beware.
Tourism
While tourism abroad has ascended to new heights in light of the
strong Canadian currency and relatively healthier economy, international
visits to B.C. have continued to stumble near recessionary lows.
Factors boosting Canadian travel abroad have also hampered a recovery
in the flow of international visitors to B.C. International tourist
entries rebounded slightly in June following a 2 per cent decline in May
to reach a seasonally-adjusted 350,700 visits, up 1.3 per cent from
May. Comparable growth was observed for both overseas and American
visitors.
Despite remaining near the top-end of post-2010 Olympic range, total
international tourism levels continued to trend well below average
levels observed in the mid-2000s. The pace of U.S. visits is only about
80 per cent of 2005 levels, while overseas visits are about 95 per cent.
Through June, total international tourist visits to B.C. reached 1.82
million persons, up 2.1 per cent from same period 2011. While the flow
of visitors is comparable to the last few years, it remains more than 10
per cent below mid-decade levels.
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