When Statistics Canada released its July retail sales report today, it dished out a few unwelcome surprises – and a bombshell.
Among the surprises, based on what economists – though perhaps not average Canadians – had expected: Growth in retail sales was a measly 0.5% in July; and growth in June was revised lower to 0.4%, from the originally reported 0.6%. Year-over-year, retail sales rose just 1.8% adjusted for inflation.
The saving grace, sales of auto and parts dealers rose 2% month over month. Without them, retail sales were flat – also worse than economists had expected.
And by province, there were some ugly differences: on a year-over-year basis, not adjusted for inflation – more on that in a moment – nominal retails sales jumped 5.7% in British Columbia and 4.6% in Ontario. But at the other extreme, nominal retails sales edged down 0.7% in Newfoundland & Labrador, and slumped 3.6% in Saskatchewan and 3.7% in Alberta.
These two provinces are the epicenter of the Canadian oil bust, where a deep recession has set in. Home sales are plunging. Layoffs are cascading through the local economies. Uncertainly reigns. And consumers are reacting the best they can.
And here’s the bombshell: over the last six months, retail prices have jumped at the fastest rate in over a decade.
Inflation has obviously been too low in Canada, the US, Europe, Japan, etc. Heaven and earth must be moved by central banks to raise inflation. The Damocles sword of deflation – when money gains in value rather than loses in value – is hanging over our entire civilization.
But OK, when you go shopping, this sort of scenario isn’t quite that visible. What you see are price increases, and some of them are very painful.
Last week, Statistics Canada released the Consumer Price Index for August. It rose 0.3%, after having risen 0.3% in July. It was up 1.3% from a year earlier – too low as usual. It was held down by energy prices, which had plunged.
But the report also found that compared to a year ago, prices of food purchased in stores jumped 4% and of meat 6.3%. In restaurants, prices rose 2.8%. Prices of household furnishings and equipment rose 2.5%….
So today’s retail sales report captures price changes of retail items but not healthcare, rent, and other items that are included in the CPI. Krishen Rangasamy, a senior economist at Economics and Strategy, National Bank Financial, did the math and put it in a chart: retail prices had soared at an annualized rate of 6% over the past six months, the sharpest increase in over a decade. I added the red oval to his chart:
The sharp devaluation of the Canadian dollar, so eagerly pursued by the Bank of Canada, makes imports of all kinds more expensive. This ripples through the economy to eventually hit consumers as inflation. And there are other reasons that would heat up inflation at the retail level. So for many Canadians, inflation is very real. It eats into their pocket books at a painful rate. And that’s not going to help consumer spending.
It comes at the worst possible time: the economy shrank over the first two quarters and was thus in a “technical recession.” Now everyone is relying on consumers to pull the economy out of its mire. Perhaps they can if they borrow even more and spend money they don’t have, but these price increases are making that job much tougher.
The Bank of Canada was fretting about the ballooning debt of Canadian households all last year and called it a risk to “financial stability,” perhaps in preparation for raising its benchmark interest rate. Then Canada’s economy tanked. So now, more household debt is supposed to bail it out. Read… The Time Bomb under Canada’s Economy: Soaring Household Debt, and Suddenly Delinquencies!
Enjoy reading WOLF STREET and want to support it? You can donate. I appreciate it immensely. Click on the beer and iced-tea mug to find out how:
Would you like to be notified via email when WOLF STREET publishes a new article? Sign up here.
I can attest to rising consumer prices where I live on Vancouver Island. We produce most of our own food at home, but occasionally we go for a change. I hit Superstore last Thursday and simply could not bring myself to buy much of anything. Beef is astronomical. It would always be fun to cook something unusual (for us) on either Friday or Saturday. I always call Friday pub night, and Saturday is Hockey Night in Canada, so either of those days are ripe for a new menu. I just am cowed (excuse the pun) by the prices and can’t do it. My daughter often complains about grocery prices for her family and I can sure see why!! Hamburger is around $6.00/lbs. If you wanted to cook a roast, a crappy cut is over $20.00, a good roast is $40.00+. Canada grows surplus beef so I guess it is being exported due to our low dollar. Of course anything imported from the States is now 25% more.
I have to order some weird size tractor tires from kentucky. Holding off until I have to.
Oh well, salmon tomorrow. Maybe we’ll have a curry this Friday.
Re: beef- the drought is a factor. The herd is shrinking when normally given these prices it would be expanding. Thank god for pork but when you want a steak..
Kind of off the topic but the ongoing advertising from Keiser raises my eyebrows. Who is paying for it? My Guess- Russia.
Nothing wrong with that it’s a free country- too bad Russia isn’t.
Thank God for Putin- not pork.
Canada’s sanctions against Russia brought about Russia’s sanctions against Canadian pork.
All of those tons of pork heading to Russia is now in our supermarkets at bargain basement prices.
The pork might not be Kosher but the prices are.
Prices are going up in the US too, it’s disguised in smaller packages instead of more dollars, folgers coffee for instance has lost 18 Oz in the last year, the price is the same though. Cans of ravioli went up 25 cents last week, the price of a presided pack of cheese has gone up a dollar, as well as cobblestone bread is now selling half loafs at 3/4 the price of a full loaf. I have a cleaning business and I am seeing a lot more young women getting into this business, I have asked a few about it and they all say the same thing there’s no jobs in their degree fields cleaning is the best money they can make, I have even been approached by building managers requesting that I hire them to work for me. Strange very strange when people are looking down the ladder to improve themselves.
I’m gonna buy some extra maple syrup and Canadian beer at the store tomorrow to help.
I’ll be thinking about you Canadians when I’m eating my pancakes and getting drunk.
– There’s a drought going on in the south east of N.-America. (think: California) and California is a (large) net exporter of Agricultural products to the rest of the US & Canada. So, consumers in the entire N.-America, feel this way the drought in their wallets.
– For beef the same story. The size of the herds are at a 64 year low as a result of the drought (think: less grass available)
– And since the US is a net exporter of beef & grains, the rest of the world will feel the drought here in the US as well.
Manipulating currency and lowering interest rates is a messy affair when you are not printing one of the reserve currencies.
Here’s the thing.
The dollar is plunging.
Costs of freight keep rising.
Costs of importing keep rising.
Rents and Lease’s keep rising.
Property Taxes keep rising.
Property assessments keep rising.
Wages keep rising.
So what’s a retailer supposed to do.. pass it along to the consumer. Consumer doesn’t like that much. So what does he do, shop on line. But here’s the thing, when you shop on line your not saving any money when you take into consideration the exchange rate, shipping costs and customs clearance costs. So… considering people are also tapped out no one buys anymore and seeing how all of our crap comes from China – China crashes and burns. And the chain reaction of a full Global Depression sinks in after soo many years has passed.
Wages keep rising???
MAS
Agree with the list except for, “Wages keep rising. “.
Take grocery stores for example. It used to be a Safeway job, or any other large food store job paid a decent wage. Now, the unions are eviscerated as they compete with Sobey’s, etc and other large poor mindset employers. Plus, competing with globalized trends now that almost every trade/product that can be exported has been exported and now competes ….engineering from India is a good example, or CAD services. Except for the recent blip in trade wages due to Oil Sands development where companies throughout Canada had to pay reasonably well to retain their skilled employees, that seems to now be over, (for the forseeable future at least).
Regular folks are being hosed. Next will be services and education, (nurses, RCMP, teachers, etc.) as everyone else decires their own situation and piles on to punish others. We are in a race for the bottom, but costs aren’t part of the mix. We are getting poorer as we enter the downward trajectory.
see: Days of Rage are Coming….http://www.oftwominds.com/blog.html
The listed small inflation increases do not come close to cost of living increases.
1. The official inflation does not cover things that people really need, like housing, and food. I guess, the geniuses that came up with the inflation basket are the same ones who are the prime wood for CB jobs.
2. Canadians all along the border, used to go shopping to the US where prices were cheaper. With the Canadian dollar down, this has stopped, and this price increase does not show up anywhere.
3. I noticed some US branded products, even though made in Asia, had double digit price increases. iPad inflation at work.
Mr Global ha been eating his host (John & Jill Public) since 1980, when the first GOP Puppet, Reagan got elected through a treasonous backroom deal with the “evil” Iranian Ayatollah (clear treason and yet he’s been sainted by the hard right).
Profit by any means, without a thought for collateral damage imposed on society.
It’s time to start the long arduous effort to reverse the last 50 years of corporate/capitalistic cannibalism
Uh oh. Things must be getting scary, the trolls are back. You won’t disrupt this forum with your 1930s style chop logic SRV.
Food is up but of COURSE there’s no inflation. Glad I bought all those 1.5 pound cans of meat when I did. Nothing but rubber chicken and pork on the truckstop buffet scene, and of course they’ve removed all protein from the salad bar. My Atkins meal bars (5 to a box) have jumped to over $8. One pint milk bottles are now 12 ozs. Many of the truckstops have stopped selling quarts of milk. And if you DON’T drink Red Bull, forget it. The sad part is, it no longer even surprises me. ?