January 25, 2010
Economic update
Canadian retail sales join many other indicators on an upward trend
In the ongoing effort to monitor where consumer spending is headed, Statistics Canada reported that retail sales in November 2009 declined 0.3% versus October. However, this left them 1.2% ahead of November 2008.
On a three-month moving-average “smoothed” basis (-1.0%), total retail sales were almost back to even, year over year. They had been as bad as -5.7% in February.
Total retail sales have been on an improving trend and “smoothed” auto and parts sales have been a big part of the reason. Motor vehicle sales did idle in November, however.
In key construction-related categories, “smoothed” furniture, home furnishings and electronics sales increased dramatically, but they were still negative versus the previous year. Home centre and hardware store sales moved onto positive ground for the first time since December 2008.
Wholesale trade also on an uptrend
Moving beyond retail sales to look at other key ingredients of the economy, all of the major sub-component wholesale trade figures were less negative on a year-over-year basis in November.
Month-over-month wholesale trade increased in all provinces except Nova Scotia and New Brunswick. Ontario and Quebec made the most substantial gains. Motor vehicle sales in November adjusted downward.
This was after consistent growth extending from December 2008 through October 2009.
Leading indicators report
Also of note was the +1.5% month-to-month change reported by Statistics Canada in its December leading indicator report. That was a seventh straight monthly increase.
More significantly, it was the highest month-to-month jump since September 1958, although February 1983 was a match.
For the second month in a row, none of the 10 sub-component indices of the leading indicator fell.
One was flat, the average number of hours in the manufacturing workweek.
Especially favourable among the 10 sub-series were the housing indicator (starts and resales), durables sales and orders, the Toronto Stock Exchange and the U.S. Conference Board leading indicator.
Residential real estate prices strong
A crucial indicator of consumer sentiment can also be found in existing home resale prices.
The very low mortgage rates have been keeping interest in real estate at a fever pitch.
When the value of one’s home holds up or increases, homeowner confidence remains solid or takes flight.
According to the Canadian Real Estate Association, the median selling price of existing homes in Canada in November 2009 was +19.3% versus November 2008.
For the six largest cities in the country by population, the year-over-year change in average price was: Vancouver +22.0%; Toronto +13.5%; Ottawa +7.7%; Montreal +7.6%; Calgary +4.4%; and Edmonton 0.0%.
This says that most Canadians have an optimistic frame of mind concerning the outlook.
World Bank revises forecast upwards
As a final note, the World Bank has raised its forecast for global growth in 2010 to +2.7%.
In June 2009, the projection had been +2.0%.
There is a caution that growth may slow for a while in this year’s second half due to the delayed improvement in labour markets and the termination of various governmental stimulus packages.
Then in 2011, growth will climb to +3.2%. This will still leave world output short of where it was in 2008, prior to the deepest recession since World War II.
For more articles by Alex Carrick on the Canadian and U.S. economies, please see his market insights. Mr. Carrick also has an economics blog. His lifestyle blog is at www.alexcarrick.com
Data source: Statistics Canada | Chart: Reed Construction Data – CanaData.
Data source: Statistics Canada | Chart: Reed Construction Data – CanaData.
