Pain from a slowing economy is being reflected at the shopping mall, as December retails sales slowed to a pace not seen since the 2008 financial crisis. Experts point to a few factors responsible for the slowdown: the low loonie, a slow to start to winter, plummeting oil prices and rising consumer costs. Not only are Canadians are spending less, costs for everyday items are rising – and that means fewer rings at the cash register.
Related Read: Brace for a Lower Loonie Reality>
A December Dip
Statistics Canada says retail sales (seasonally adjusted) fell 2.2 per cent in December 2015, compared to the month prior. Sales in December came in at $43.2 billion. But it should be noted that although month-over-month sales were down, they were up slightly year over year, from $42.12 billion in December 2014. But unlike last year, the low loonie is blamed for the bulk of 2015’s slowdown.
The Mild Winter is Also a Factor
Canada is a winter nation – when temperatures are unusually high, it impacts industries who rely on the cold weather and resulting customer demand. This winter, warmer temperatures dissuaded Canadians from the seasonal sale of winter coats, boots, and other snow-related gear. I have experienced this first hand; in December I remember seeing a layer of dust on a display of shovels at a local hardware store. As well, this year I didn’t buy a winter jacket of winter boots, both which I fully intended to. Warm weather makes it harder to justify a big winter purchase.
It seems I’m not alone in this decision. Stats Can reports store types typically associated with holiday shopping registered weaker sales in December. Sales at clothing and clothing accessories stores were down 3.6 per cent, the first decrease in three months. Shoe stores also saw a 5.4 per cent drop in sales, likely due to shoppers like me deciding not to buy new winter footwear.
The Incredible Shrinking Wallet
Canadians are worried about the price of everyday items and how the low loonie will affect our ability to buy. The Organisation for Economic Co-operation and Development says core inflation in Canada is the highest among its 34 members of primarily high-income countries. The cost of fresh fruits and vegetables was up more than 18 per cent in January compared to the same time last year. Eating out is also getting more expensive, overall the cost of was up 4 per cent in January. Every indication is with the loonie staying persistently low, our grocery bill is bound to go up more.
Beyond the Shopping Mall
Weaker spending power affects Canada at all levels – our Federal government has recently announced it must take greater-than-expected measures to help stimulate the economy. With the price of oil dipping below $29 a barrel, it’s not expected that the loonie will recover in the short term. As a result, the Liberals will need to prop up economic growth with increased spending and stimulus projects. Recently, Federal Finance Minister Bill Morneau announced a much bigger-than-expected 18.4-billion deficit for the fiscal year. While this might not have an immediate impact on consumer spending, it does send the signal that everyone is suffering from a lower loonie and the inability to spend.