Canadians are on a big-ticket shopping spree, retail data shows

Credit/Getty Images

Canadian consumers continue to snap up big-ticket items such as vehicles and furniture, providing a powerful jolt to an economy desperately in need of one as other areas (like low oil prices) drag on momentum.

Statistics Canada said Thursday retail sales jumped more than expected in August – the fourth month in a row sales have ticked higher, despite persistent concerns among economy watchers about the affect sliding prices for oil and other commodities will have on consumers’ pocketbooks (by way of jobs and incomes, etc.).

“Retail sales continued their recent ascent in August,” Brian DePratto, an economist at TD Bank said. Low borrowing rates and lower gasoline prices provided “ key supports” to spending, he said, while the federal handout to families (the Universal Child Care Benefit) in late July, likely also provided some lift.

Here’s five things consumers should know about the latest retail sales figures:

Story continues below advertisement

Big-ticket spenders

Vehicle sales continue to put up record numbers, rising 2.0 per cent in August. “Motor vehicle and parts dealers saw another strong performance,” DePratto said.

A lower loonie more than likely played a key role here, as Americans crossed the border to go car shopping, experts say. But domestic buyers are still turning up on dealership lots, attracted by super low interest rates, Scotiabank auto economist Carlos Gomes said.

Low interest rates on lines of credit and financing options also continue to lift sales for other big ticket items.

“Sales also advanced markedly at furniture and home furnishings stores,” TD said. Furniture stores reporting a 3 per cent rise, Statscan said.

Child benefits pocketed

Spending cooled a touch however on smaller-ticket items, economists noted, suggesting many families pocketed at least some of the child benefit cheques that arrived in late July, or used the funds to pay down debts.

Story continues below advertisement

“Outside of those big ticket items, however, it doesn’t look like Canadians are spending their Universal Child Care Benefit cheques just yet,” Royce Mendes of CIBC Economics said. “Electronics, clothing and sporting goods have not shown the expected strength from that windfall.”

MORE: Beefed up child benefit cheques start arriving as economy wobbles 

Consumers in regions where employment levels are being affected by oil’s decline (amid other commodities prices) may be holding back, too, Mendes said. “They could look [at] the near term volatility in their income and not boost spending.”

Statscan noted that a later start to the school year in some jurisdictions may have impacted the data. “Sales at stores typically associated with back-to-school shopping were generally lower,” RBC economists said.

Oil shock bites

Spending in provinces with more exposure to the energy sector – chiefly Alberta and Saskatchewan – are indeed seeing  households guard their pay cheques more carefully.

Alberta saw total retail spending decline 2.9 per cent compared to last August, while Saskatchewan consumers dialed back by 2.3 per cent – the only two provinces in the red. In contrast, British Columbia (7 per cent) and Ontario (5.4 per cent) were the top performers.

MORE: Latest coverage — plunging oil prices 

Loonie impact

The loonie’s sharp decline in the past year didn’t amount to sharp price increases for products in the month, it appears. Volumes, not prices, are what drove the increase in spending, economists said.

Story continues below advertisement

“The strength in sales was even stronger in real terms,” TD’s Brian DePratto said.

Debt fueled

The elephant in the room amid all this spending however is that much of it is being fueled by a growing debt bulge on consumer balance sheets. Ultra low rates continue to encourage the purchase of big, expensive items.

MORE: What’s fueling Canada’s economic recovery? Even more debt

While the spending spree is providing an important economic support in the near term, experts say, it could pose problems down the road when interest rates rise, or if the country dips back into recession.

“Canadian consumers continue to hang in there despite a high household debt burden,” BMO economist Benjamin Reitzes said.

Story continues below advertisement


Sponsored content