economy
02. economy For the past few years, per capita retail spending in Metro Vancouver has been robust. Is it time for an adjustment?
THE TREND IN RETAIL SPEND
Retail sales have long been viewed as a dependable leading indicator of economic activity: increases imply consumer confidence, support employment, and yield corporate profits, while decreases often precede economic slowdowns. In Metro Vancouver, retail sales have carved an impressive upward path since the beginning of 2014, increasing by 36% in aggregate. By the end of 2018, regional retail sales were bringing in almost $900 million more per month than at the beginning of 2014. Retail sales in Metro Vancouver accelerated towards the end of 2014 through late 2017, when they increased by 33%. To put this in context, retail sales in the Montreal and Toronto markets rose by only 16% and 23%, respectively. Of note is that these increases were not merely the product of growing local populations, as the the number of adult residents living in these regions rose by only
3% in Montreal, 5% in Vancouver, and 6% in Toronto. When adjusted on a per capita basis, Metro Vancouver’s increase in retail sales is even more impressive, posting 27% growth in the three years ending in Q4 2017 compared to 17% in Toronto and 12% in Montreal. Increasing aggregate income and tourism are two driving forces here, but a third is rising home prices and the “wealth effect” (whereby rising asset prices result in more spending). With this in mind, the ongoing normalization of Metro Vancouver’s housing market and the associated moderation of prices are likely culprits in aggregate regional retails sales falling by 3%, and per capita sales falling by 5%, since the beginning of 2018. If home prices continue to recede over the coming months, it is likely that retail sales will too— and this, in turn, may generate some minor labour market wrinkles.
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