Putting retail sales figures in context
The situation facing retailers—while far from a retail apocalypse—is worse than the headline numbers indicate
By ATB Economics 25 January 2021 2 min read
Retail sales are an important economic indicator because they tell us whether consumer spending is trending up or down. This, in turn, helps us get a sense of how the economy is doing overall.
But, while they do provide a rough gauge of how retailers are faring, they leave out a lot of critical information in this regard.
What we really need to know is the difference between the revenue and expenses per retailer. If, for example, the number of retailers goes up, there may be less revenue per store even if sales rise.
Similarly, if expenses rise faster than revenues, this tells a different story than the revenue numbers on their own.
Unfortunately, net revenue per retailer is not readily available. We can, however, get a better sense of how retailers are doing by using population growth as a proxy for changes in the number of retailers. We can also edit out the noise created by inflation by expressing the sales data in constant rather than current dollars.
Before making these adjustments, we see that retail sales in Alberta over the first 11 months of 2020 were down by 2.9 per cent compared to the same period the year before. That is not great news, but given the level of economic disruption we’ve been experiencing, it could have been a lot worse. It’s also encouraging that sales in 2020 were consistently higher than in 2019 from June through November.
After accounting for inflation and population growth, the situation facing retailers—while far from a retail apocalypse—is worse than the headline numbers indicate.
Year-to-date per capita sales in constant dollars were down by 5.7 per cent as of November. (Again, we don’t know if expenses went up or down.) Sales in 2020 were, moreover, down by 10.5 per cent compared to 2017 when the economy was growing a bit faster than it was in 2019. And if we compare 2020 to the peak reached in 2014, sales were down by 16.6 per cent.
These numbers are, of course, for the retail sector as a whole and will vary greatly by sector and across individual businesses. The year-to-date sales posted by clothing stores, for example, were down by 26.2 per cent in November whereas sales at food and beverage stores were up by 7.4 per cent. Still, the numbers tell us at least two important things.
First, buttressed by pandemic-related income support programs, retail spending did not collapse in 2020. We still have to wait for December’s numbers, which Statistics Canada suggests will be down, but consumers spent enough to ward off what could have been an even worse year.
Second, “it could have been worse” is not good economic news. And while some retailers did well, or at least well enough, last year, many struggled and will continue to do so as the pandemic wears on.
Answer to the previous trivia question: Unemployment Insurance was renamed Employment Insurance by the Chretien government in 1996.
Today’s trivia question: True or false? Restaurants and bars are considered part of the retail sector in Canada.