BC Economic Snapshot Sept. 29, 2012

Retailers Still Face Challenges

VANCOUVER, BC, Sep 29, 2012/ Troy Media/ – Consumer spending on retail products in B.C. gained in July, partially reversing the sharp drop off observed in June. Total sales rose 0.7 per cent to a seasonally-adjusted $5.13 billion in July.

While activity was up 2.8 per cent from same month 2011, retailers have struggled this year. Estimated provincial sales volume in both current- and constant-dollar terms has generally moved sideways through the first half. A weaker price environment pushed current-dollar volumes slightly lower since the second quarter.

General economic uncertainty, tempered consumer confidence, high debt loads and weak housing markets have likely kept buyers from opening up their wallets. Meanwhile, weak population growth has limited expansion of the consumer pool. More recently, changes to duty-free allowances have also made cross-border shopping to the U.S. more compelling, which is expected to siphon off some activity from the local shops going forward.

While the sales trend has been flat, year-to-date retail volume was still up 4.2 per cent from same-period 2011, led by higher sales in Metro Vancouver (6.2 per cent).

Retail sectors recording the strongest gains were recorded by motor vehicles and parts (9 per cent) dealers and clothing retailers (18 per cent) with growth in the latter driven in part by higher prices. Annual retail growth is expected to narrow through the end of 2012.


Sales trends for most sectors have declined in recent months, and economic conditions are unlikely to fuel a substantial rebound. Expect annual current-dollar retail volumes to grow by about 3.5 per cent to 4 per cent this year, with constant-dollar gains in the 2.5 per cent to 3 per cent range. While higher than 2011, this will still mark a weak year of growth relative to the past decade.

Demographics

According to the most recent estimates by Statistics Canada, B.C.’s population grew to more than 4.62 million persons as of July 1, 2012, marking a gain of 13,400 persons (0.3 per cent) from April 1, 2012 and a gain of just under 46,000 persons (1 per cent) from a year ago. The quarterly population gain reflected positive net international migration of 11,490 persons and a net natural increase of above 3,100 persons. B.C. continued to record a net decline in the interprovincial flow of residents.

Adjusted for seasonal factors, population growth sped up in the second quarter to reach an annualized rate of 1.1 per cent, up from 0.9 per cent in the first quarter. Despite the gain, the low growth trend that has been the norm since late-2010 persisted.

A rise in net international migration of 30 per cent fuelled the rise in population growth in the second quarter. However, the details of the gain are less positive. Growth was led almost entirely by a higher number of net non-permanent residents, which represents a group including students and temporary workers.

In contrast, the estimated inflow of landed immigrants, which represent a permanent source of population gain and consumer demand, fell 10 per cent from the first quarter to a seasonally-adjusted 9,100 persons. The inflow of international immigrants has yet to fully recover following the recession, which could reflect hesitation to move on the part of prospective immigrants in light of global economic uncertainty or more restrictive policies on the part of Canada.

On the interprovincial front, the outflow of B.C. residents to other provinces continued to trend higher in the second quarter, but increases were more than offset by more interprovincial in-migrants. The net outflow of residents to other province declined to a seasonally-adjusted 1,220 persons, from more than 2,200 in the first quarter. Stronger labour market conditions in Alberta and Saskatchewan continued to draw people to those regions, while B.C. recorded significant net gains from Ontario and Manitoba.

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