By Ed Strapagiel

After 6 months, 2018 year-to-date total Canadian retail sales are up 3.6%, according to the latest Statistics Canada numbers. That's half of the 7.2% growth recorded for the first half of last year, although 2017 was particularly strong for Canadian retail.

The peak of the current cycle is now well past us. Year-over-year retail sales growth topped out at 8.0% in Q2 of last year. This has declined consistently, to 7.3% in Q3 2017, 6.7% in Q4 2017, 4.0% in Q1 2018, and finally to 3.4% in Q2 2018.

The 3 month growth trend (orange line in the chart above) has deteriorated steadily since the highs of 2017, and the underlying 12 month trend (green line) is plunging as a result. The prospects don't look promising for the balance of 2018.

The Food & Drug sector in particular is dragging down overall Canadian retail sales. After 6 months, year-to-date sales increased by only 1.1% versus a year ago. In Q2 2018, performance was even softer, with retail sales gaining just 0.3% year-over-year. The 3 month growth trend (orange line) has been on a steady decline since mid 2017. The underlying 12 month trend (green line) is also cooling off, and is due to weaken even further in the months ahead.

The two largest store types in this sector have suffered year-to-date retail sales declines so far in 2018. Supermarkets & other grocery stores' sales were down 0.4% after 6 months, while health & personal care stores were down 0.1%.

Convenience stores and specialty food stores did post above average year-to-date retail sales increases, at 5.2% and 10.8% respectively. But these two store types account for just under 10% of the Food & Drug sector and have only minimal impact.

The Store Merchandise sector is still in a "not bad" state, but current trends indicate weakening ahead. After 6 months of 2018, retail sales are up 4.4% year-over-year, significantly lower than the 6.5% annual gain posted last year. The progression however is concerning. From Q3 2017 to Q2 2018, year-over-year sales gains have been 7.5%, 6.9%, 5.9%, and 3.4% respectively. The pattern is pretty clear.

The 3 month growth trend (orange line in the chart above) peaked in mid 2017 and has been declining ever since. The underlying 12 month trend (green line) is now on the decline and is bound to get worse before it gets better.

Only one store type can be described as "hot" so far in 2018: electronics & appliance stores' retail sales are up 10.9% after 6 months of the year. Most other stores have had only modest gains, and shoe stores were even down 2.5% year-to-date. General merchandise stores' retail sales gained just 2.7%, which served to drive down the overall performance of the sector.

Note that Statistics Canada is now suppressing the breakdown of general merchandise stores for confidentiality reasons. The figures in the table below are estimates based on previous trends.

Automotive & Related is exhibiting the same behaviour as the other major retail sectors. After performing at a high level in 2017, retail sales have cooled considerably in the last 12 months.

New car dealers had record sales growth in 2017, but things have slowed significantly so far this year. Year-to-date retail sales are up just 1.7% after 6 months of 2018.

Strong retail sales gains at gasoline stations upheld the overall performance of the Automotive & Related sector, although this is all due to higher gas prices at the pump. Their retail sales were up 11.6%.after 6 months of 2018.

By The Numbers

Special Note: Statistics Canada has made updates to 2017 numbers, and has also moved retail storefronts of telecom companies out of electronics & appliance stores and into a non-retail category, Telecommunications (NAICS 513). Retail trade statistics have been revised back to January 2012.

For definitions of store types, see Statistics Canada NAICS.

Canadian E-Commerce Sales

StatsCan started providing ecommerce retail sales data in January 2016. While the amount of data is limited, some trends appear to be emerging. Here are some results.

Overall, e-commerce represented about 2.7% of total Canadian retail sales for the 12 months ending June 2018, including both pure play operators as well as the online operations of brick & mortar stores. Canadian consumers however also buy online from foreign websites which is not captured in these numbers.

Canadian e-commerce sales were up 15.7% year-over-year in Q2 2018, but this is much less than the 35.0% gain recorded in the same period a year ago. E-commerce retail sales gains are still in double digits, and are still much higher than for location based retail, but growth is slowing down.

Note that location based retail is the same as that in the preceding large "By The Numbers" table. It's what's normally reported as Canadian retail sales. Except that it isn't. Location based retail excludes another section called Non-Store Retailers (NAICS code 454), which includes electronic shopping and mail-order houses, which in turn is where (mostly) pure play e-commerce businesses are. For the 12 months ending June 2018, electronic shopping and mail-order houses had an estimated $9.2 billion in e-commerce sales.

But that's not the only source of e-commerce, as (mostly) bricks & mortar location-based retailers also sell online. For the 12 months ending June 2018, this group had an estimated $7.14 billion in e-commerce sales. With electronic shopping and mail-order houses, there's a grand total of $16.7 billion in e-commerce sales by Canadian operators over the year. Note that this does not include foreign e-commerce purchases made by Canadian consumers, but it does include e-commerce purchases made by foreigners at Canadian businesses.

For electronic shopping and mail-order houses, an estimated 83.2% of their sales are allocated to e-commerce. For (mostly) bricks & mortar retailers, it can be estimated that just 1.2% of their total sales come from e-commerce.

In the final section of the above table, (mostly) pure play operators (namely, under electronic shopping and mail-order houses) generated an estimated 57.4% of all e-commerce sales in Canada, while (mostly) bricks & mortar location-based retailers' share of e-commerce is 42.6%.

For more explanation on the e-commerce numbers, see Statistics Canada: Retail E-commerce in Canada.