Retail sales fell 1.1% in January as COVID-19 limited in-person shopping

Canadian retail sales fell for a second consecutive month in January as many non-essential retailers were forced to restrict in-person shopping due to the pandemic, but early indications point to a rebound in February as the restrictions eased.

Statistics Canada said Friday retail sales fell 1.1 per cent to $52.5 billion for the first month of the year, however its preliminary February estimate pointed to a gain of 4.0 per cent for the month.

“The recovery in February retail sales adds to the evidence suggesting that GDP growth continued into the second month of the year,” CIBC senior economist Royce Mendes wrote in a report suggesting the bank’s forecast for the first quarter might have been too conservative.

“That being said, the risks to the economy from the third wave of the virus are now greater than they were at the time those forecasts were made. As a result, the second quarter might begin on weaker footing than previously envisioned.”

Recent economic data has suggested a stronger-than-expected start to the year.

Statistics Canada reported last week that the economy added 259,000 jobs in February, outpacing the net gain of 75,000 jobs that had been expected and the Bank of Canada said earlier this month that it now expects the economy to grow in the first quarter compared with its earlier expectation that there would be a contraction to start the year.

TD Bank economist Ksenia Bushmeneva said credit and debit card data show spending staged a solid rebound as provinces began to gradually lift restrictions last month.

“All in all, the Canadian economy has shown relative resilience in the face of the second wave of the pandemic, and the recent economic reopening ushers optimism about the days ahead,” Bushmeneva wrote.

“That being said, the slow pace of vaccination-to-date and the recent uptick in cases continue to pose uncertainty to consumers and businesses alike about what the next few months could hold.”

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The drop in January retail sales came as core retail sales _ which exclude gas stations and motor vehicle and parts dealers _ fell 1.4 per cent.

Sales at clothing and clothing accessories stores dropped 17.8 per cent and furniture and home furnishings stores lost 15.1 per cent. Sales at sporting goods, hobby, book and music stores fell 16.8 per cent.

Meanwhile, higher gasoline prices helped boost sales at gasoline stations which saw an increase of 0.9 per cent in January.

In volume terms, overall retail sales fell 1.6 per cent in January.