economy
A PER-PERSON PURCHASING PULLBACK Total retail spending has been steadily increasing in Canada since the early months of the pandemic—though a different narrative emerges when adjusting for record population growth.
Retail spending is, yet another, metric that the Bank of Canada is watching. As they’ve raised interest rates, their intended goal is to disincentivize spending and borrowing (the latter of which we’ll explore later on) and incentivize saving. So it makes sense then, that they would be actively monitoring retail spending as one of the gauges on how well their rate hikes to date have been working. While some retail spending will continue on regardless, like a lot of grocery store purchases, other more discretionary types of spending will pull back like dinners at restaurants or the amount of new clothing purchases. And if you just observe the top line retail spending numbers, it looks like they haven’t been working well at all. Seasonally-adjusted retail sales nationally were just shy of $198 billion in the second quarter of 2023, a 0.8% increase over the same period last year.
But as we pointed out in the last edition of the rennie landscape, Canada’s population has been growing like never before, adding a million people last year alone (including 150,000 here in British Columbia). So when we account for population, per capita retail spending has indeed been declining of late, with Q2 registering just over $6,104 in retail sales per working-age person in Canada. That translates into a 1% decrease over Q2 2022, a small decline to be sure, but a decline nonetheless. The trend here in British Columbia is following a similar path. Retail sales in the second quarter were just over $27 billion, a 1% increase over last year, while per capita retail sales, at $6,000 per working-age person were down 1% from last year. While declining retail sales would normally be viewed as bad news, this is one indicator of an economy that is cooling off, and in our current economic environment that is welcome news to the Bank of Canada.
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