Retail trade

Retailers began 2006 with strong sales, likely buoyed by gift card redemptions. This is the third year in a row that sales were strong in January.

Retail sales rose for a fourth consecutive month in January, advancing 1.4% to a record high of $31.8 billion.

January's gain was the strongest in the last six months. Retailers experienced moderate increases in the last quarter of 2005 with November's advance of 1.0% sandwiched between October's and December's modest increases of 0.6% each.

Shoppers increased their spending in all sectors in January, with the exception of the food and beverage sector, which saw sales fall 1.2%. New car sales (+1.4%) rebounded in January after falling 0.7% in December. For a second consecutive month, new car dealers were not the sole driver of the increase in retail sales. Excluding sales by dealers of new, used and recreational vehicles and auto parts, retail sales still advanced 1.4% in January.

Sales increased by at least 3.0% in four of the eight retail sectors — furniture, home furnishings and electronics stores (+5.0%), miscellaneous retailers (+4.8%), building and outdoor home supplies stores (+3.1%) and general merchandise stores (+3.0%).

Moderate gains were also posted by retailers in the pharmacies and personal care (+0.8%), and the clothing (+0.8%) sectors.

In constant dollars, retail sales rose by 0.9% in January, following a 0.3% increase in December.

Gift cards, other factors, boost January sales

Strong economic fundamentals, together with the popularity of gift cards, likely provided the foundation for the strong retail performance by many retailers in January. Other factors that may have contributed to strong retail sales during the month include unseasonably warm temperatures and the increasing observance of certain religious and cultural days in January.

January sales jumped in stores that tend to carry gift cards such as miscellaneous retailers (+4.8%) and general merchandise retailers (+3.0%), which include department stores. Miscellaneous retailers include office supplies, sporting goods, hobby, music and book stores. This sector has been on an upward growth path in sales since mid-2003.

With housing starts at record levels in the past year, the corollary effect on furniture and home furnishing demands after homes are built have benefited retailers in the furniture, home furnishings and electronics stores sector in recent months. With the added effect of gift cards, sales in furniture stores soared 6.5% in January. Sales in furniture stores have been on a steady upward trend since July of last year, with the exception of a short pause in November.

Home electronics and appliance store sales were also robust (+4.7%), likely due to the redemption of gift cards after the holiday season. This continues the gain made in December following declines in October and November. Home furnishing store sales were up for the fourth consecutive month in January (+3.7%) while sales at computer and software stores increased 2.3% after pausing in December.

Among retailers in the building and outdoor home supplies sector, home centres and hardware store sales increased for the sixth consecutive month, climbing by 2.7% in January. Specialized building material and garden stores, a smaller group of retailers, also saw sales increase 4.6%.

Steady growth in auto sector

New car sales were up 1.4% in January after edging down in December. This continues the upward trend in new motor vehicle sales that began at the start of 2004.

Used car dealers saw their sales increase 1.3%, adding to gains of 3.8% in December and 2.3% in November. As a result, January sales were 12.3% higher compared with the same month last year, and the highest year-over-year advance for this group of retailers since 2002.

Sales at gasoline stations rose by 1.0%, levelling off the strong upward trend that started in the fall of 2003 when oil prices started to soar.

Food and beverage sales fell 1.2% in January, mainly attributable to a 3.0% decline in supermarkets. This was only partially offset by strong gains in convenience and specialty food stores (+3.5%) and beer, wine and liquor stores (+3.9%). Despite the decrease, sales in supermarkets have generally been increasing at a steady pace and annual gains have been over 4.5% in each of the last four years.

Widespread gains in all provinces and territories

Sales were up in every province and territory in January. Aside from Ontario (+1.0%), Alberta and British Columbia were the largest contributors to sales growth.

With $400 personal cash rebates from the provincial government in Alberta, it is not a surprise that Alberta retailers got off to a strong start this year with a 2.4% increase in sales. Retail sales in Alberta have been rising sharply since 2000, benefiting from the energy resources boom. This was reflected in Alberta's average personal disposable income growth of 7.0% for the five years prior to 2005, significantly higher than the national average of 4.6%.

British Columbia bounced back from a lacklustre performance in the last quarter, matching Alberta's 2.4% increase in retail sales in January. Both provinces saw increases in sectors relating to home furnishing and those likely to redeem post-holiday gift cards.

Retail sales in the Northwest Territories bounced back from December's weak performance with the strongest sales growth of any region in January (+6.8%), mainly attributable to the auto sector. Retail sales were also robust in Nova Scotia (+2.4%), Newfoundland and Labrador (+1.6%) and Prince Edward Island (+1.6%). This was the fourth consecutive monthly gain in each of these three Atlantic provinces.

Related indicators for February

Total employment increased by 0.2% in February for the second month in a row. The unemployment rate fell by 0.2 percentage points to 6.4%, matching the 30-year low set in November 2005.

Housing starts dropped 2.9% in February to a seasonally adjusted annual rate of 240,900 units, according to the Canada Mortgage and Housing Corporation.

Based on preliminary figures from the auto industry, the number of new motor vehicles sold in February decreased slightly. The decrease was mostly the result of lower new passenger car sales during the month.

Available on CANSIM: tables 080-0014 to 080-0017 and 076-0005.

Definitions, data sources and methods: survey numbers, including related surveys, 2406 and 2408.

The January 2006 issue of Retail Trade (63-005-XIE, $18/$166) will soon be available.

Data on retail trade for February will be released on April 21.

For more information or to order data, contact Client Services (1-877-421-3067; 613-951-3549; retailinfo@statcan.ca). For analytical information, or to enquire about the concepts, methods or data quality of this release, contact Lucy Chung (613-951-1903), Distributive Trades Division.