B.C. retail spending softened for a third straight month in July as declines in purchases of motor vehicles and parts and sales at gasoline stations offset higher housing-related purchases.
Provincial sales reached a seasonally adjusted $7.16 billion, down 0.5 per cent from June. Year-over-year sales growth decelerated to 1.2 per cent from 2.2 per cent. The Vancouver census metropolitan area led the pullback, with sales down 1.6 per cent from June and down 2.2 per cent year-over-year. In comparison, national sales rose 0.3 per cent from June with a year-over-year gain of 3.7 per cent.
The recent slide adds to a soft range-bound trend since late 2017. That said, this has largely aligned with fluctuations in motor vehicle sales and gasoline station sales and prices. The former reflects a turn from the cycle high reached late last year. Excluding these volatile retail components, retail spending has continued to rise.
Year-to-date, retail sales were up 3.8 per cent through July, and the deceleration in the trend is consistent with a slowdown of growth in B.C.’s economy. While the economy remains solid with a low unemployment rate and strong wage growth, labour availability has been a constraint to consumer demand.
Meanwhile, B.C.’s resale housing market appears to have finally turned the corner following the early-year shock of federal mortgage stress test measures and drag from higher interest rates. While still down 25 per cent year-over-year, Multiple Listing Service (MLS) sales rose two per cent from July to 6,370 units. With a second straight monthly gain, the drag of resale transactions on economic growth has ended.
Most real estate board areas posted higher sales in August, led by South Coast markets. Nevertheless, provincial sales remained sluggish and tracking at a pace last seen in 2014. Sales in the Lower Mainland and Victoria have driven the post-stress-test slump.
New listings have been lacklustre, suggesting prospective sellers are sitting on the sidelines as they wait out market softness. Balanced market conditions still prevail in the Lower Mainland and Central and Southern Interior markets, while seller’s markets persist on Vancouver Island and in Kamloops.
Nevertheless, sales weakness is eroding prices in various markets. The provincial MLS average price declined 0.5 per cent from July to $709,727 and was virtually unchanged from the same month in 2017. That said, benchmark prices point to declining Lower Mainland prices and a flattening trend in Victoria. Lower Mainland benchmark values are expected to ease another five per cent to seven per cent, led by a decline in detached-home prices. Other markets around the province are expected to see modest price growth.
Bryan Yu is deputy chief economist at Central 1 Credit Union.