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Alex Carrick, Chief Economist at ConstructConnect
Alex Carrick, Chief Economist at ConstructConnect
Alex Carrick is Chief Economist for ConstructConnect. He is a frequent contributor to the Daily Commercial News and the Journal of Commerce. He has delivered presentations throughout North America on the Canadian, United States and world construction outlooks. A trusted and often-quoted source for … More »

Retail Sales Story in U.S. and Canada is a Twisty Narrative

 
March 29th, 2016 by Alex Carrick, Chief Economist at ConstructConnect

Article source: CMDGroup

Obtaining a proper read on retail sales in the U.S. and Canada these days has been made harder  by the sharp drop in gasoline prices, -20.7% year over year south of the border and -13.1% on the north side.

As a result, February’s cash register ‘take’ by gas station operators in the U.S. was -15.6% year over year, while in Canada, in January, it was -7.1%. (Retail sales data from Statistics Canada consistently lags results from the Census Bureau by a month.)

Therefore, U.S. retail sales in February that were +3.1% year over year in total including gas station billings, were a much better +4.8% without them.

Similarly in Canada, an already good jump in total retail sales in January of +6.8% improved to an outstanding +7.3% when sales at the pump were omitted.

Chain store closings (e.g., JCPenney, Sears, Office Depot, Walgreens and Target Canada) that were earlier dominating the headlines have eased somewhat of late, but not entirely disappeared. Sports Authority has been the latest to seek bankruptcy protection while it re-organizes. For starters, the financially-shaken company plans to scale back its 450 outlets by about one-third.

Nevertheless, the bottom line is that overall retail sales in both the U.S. and Canada (Graph 1) have been doing just fine, thank you, and maybe a good deal better than that.

Furthermore, and indeed partly due to the aforementioned consumer ‘break’ on gasoline prices, they’ve been enormously helped by the automotive sector (see accompanying Graphs 2 and 3).

In the U.S., motor vehicles and parts sales are currently +6.8%. In Canada, they are +15.7%.

In America, motor vehicle and parts sales in February were slightly more than one-fifth (21.1%) of total retail sales. In Canada, in January, they were a smidge more than one-quarter (26.3%).

That’s great news for business operators and employees of shipping companies, wholesalers and glitzy walk-in showrooms.

But there is a stage in the supply chain that has not been reaping the whole benefit, domestic producers.

That’s because much of the sales demand has been satisfied by manufacturers located outside each respective country.

In Canada last year, there was a -$13 billion CAD gap between the nation’s total auto and parts exports ($87 billion CAD) and its imports ($100 billion CAD).

The year before, in 2014, there had been an even bigger foreign trade deficit in the sector, as exports of $74 billion were less than imports of $90 billion by -$16 billion.

In America in 2015, motor vehicle and parts exports were $154 billion USD, far below imports of $350 billion USD, yielding a giant shortfall of -$196 billion USD.

Most of the U.S. underperformance was with Mexico (-$71 billion), although Japan (-$49 billion) also accounted for a big chunk of the imbalance.

Graph 1: Total Annual Retail Sales, U.S. and Canada

Total Annual Retail Sales, U.S. and Canada

Data sources: Statistics Canada and U.S. Census Bureau (Department of Commerce).
Chart: CMD.

Graph 2: Motor vehicle sales in the U.S.
(12-month moving totals)

Motor vehicle sales in the U.S.

Based on not seasonally adjusted (NSA) numbers.
Data source: U.S. Bureau of Economic Analysis (BEA).
Chart: CMD.

Graph 3: Motor vehicle sales in Canada
(12-month moving totals)

Motor vehicle sales in Canada

Based on not seasonally adjusted (NSA) numbers.
Data source: Statistics Canada.
Chart: CMD.

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Category: CMD Group

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