BC Economic Snapshot July 27, 2013

VANCOUVER, BC, Jul 27, 2013/ Troy Media/ – B.C. shoppers took a few more trips to the malls in May after taking an April breather pushing retail sales higher for the month. Estimated sales rose 0.4 per cent from April to a seasonally-adjusted $5.15 billion, lagging the national gain of 1.9 per cent.

While still down from March, this was the second highest monthly volume in over a year and recent activity suggests sales may finally be breaking out of the range-bound trend observed since early-2012. Despite this small flicker of momentum, the underlying retail performance remains tepid.

May sales were unchanged from a year ago and year-to-date sales were down 0.1 per cent from the first five months of 2012. Sales, excluding volatile and big-ticket items like vehicles and gasoline, were 0.5 per cent lower over the same period, driven by lower clothing and electronic/appliance sales. The larger pull back in more common purchases, despite gains in vehicle sales, is OF more concern since it better reflects the strength of underlying consumer demand.

However, the softening is not entirely surprising as consumer demand has stumbled on weak employment and population growth trends, high debt loads, low credit growth, and stagnant home prices. Additionally, a relaxation of duty-free allowances may have also led to increased leakage of sales to the U.S.

Current-dollar sales growth for full-year 2013 is forecast to reach a subdued 1 per cent. This will mark the slowest gain since 2009 and follows a 1.9 per cent increase in 2012.

Small Business
Small businesses in B.C. remained cautiously optimistic in July, according to the steady performance of the CFIB Business Barometer index (BBI). The BBI edged lower from June to 64.9, on a scale of 0 to 100, down 0.7 points but consistent with the range observed through 2013 and the national average.

A reading above 50 means the number of business owners expecting a stronger business performance over the next year outnumbers those expecting a weaker performance.
The stable and positive confidence reading is supportive of economic expansion but levels remain below the 10-year norm and consistent with a subdued pace of economic growth. This tempered outlook is not surprising given demand challenges resulting from a weak labour market and retail trends, as well as low housing activity. Economic growth in the province is expected to reach only 1.5 per cent this year.

On the upside, a higher proportion of businesses reported that the general state of business health was “good”, albeit the rate was lower than Alberta and Saskatchewan. More businesses may also be dipping their toes in the expansionary waters as an increased proportion of businesses have recently reported an intension to take on workers, which could provide a boost the provincial labour market.

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