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The Daily

Thursday, December 21, 2006
October 2006

Retail sales fell in October for the second month in a row, as sales in the automotive sector continued to decline and back-to-school spending on clothing wrapped up.

Total retail sales fell 0.7% to an estimated $32.6 billion in October. October's decline, combined with the decrease in September, nearly offset the gains made in July and August, resulting in a relatively flat trend for retail sales. Prior to this period, retail sales have been generally rising at a rapid clip since 2004.

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Unlike September's decline, which was concentrated in the automotive sector, the weakness in October was more widespread with only three of the eight retail sectors registering sales increases. Retail sales excluding new, used and recreational vehicles and parts dealers also decreased by 0.7%.

Sales in the automotive sector fell by 1.2% after dropping 5.3% in September, mainly due to a drop in gasoline prices. The clothing and accessories stores sector saw their sales fall by 4.0% in October after a spending spree that drove sales up 6.6% in September. The general merchandise stores sector, which includes department stores that sell clothing, saw their sales follow the same pattern. Sales fell by 1.1% in October in this sector after an increase of 1.8% in September.

Sales fell for the second month in a row in the building and outdoor home supplies stores sector (-0.8%), while retail spending in the furniture, home furnishings and electronics stores sector fell by 0.3% in October. This was only the third monthly sales decline for this sector in 2006.

Partially offsetting these declines were sales gains in the food and beverage stores (+0.4%), pharmacies and personal care stores (+0.1%) and miscellaneous retailers (+0.9%) sectors. For the latter, strong sales gains among miscellaneous stores retailers (+2.6%) more than offset a sales decline in sporting goods, hobby, music and book stores (-0.7%).

Once price changes were taken into account, total retail sales fell by 0.5% in October after a 0.1% increase in September.

Continued weakness in the automotive sector

In October, continued sales declines at gasoline stations and used and recreational motor vehicle and parts dealers pulled down sales in the automotive sector. Sales at new car dealers, however, were flat.

Sales at gasoline stations fell by a further 2.5% in October, after declining by a record 12.3% in September due to plummeting gasoline prices. The value of sales at gasoline stations was at its lowest level in October since May 2005.

Used and recreational motor vehicle and parts dealers saw their sales fall for the third month in a row (-4.0%). Before this recent fall off, sales by these dealers increased at a rapid clip since the fall of 2005, and peaked in April 2006. This gain was mainly driven by increased demand in recreational vehicles. Notwithstanding the recent slide, sales remained at historically high levels.

As back-to-school spending wrapped up, sales at clothing stores fell 4.5% after spiking in September. In the same way, sales at shoe, clothing accessories and jewellery stores fell in October (-2.3%) after two strong months.

Sales at home centres and hardware stores have slowed down in recent months. In October, these stores registered their second straight monthly sales decline (-1.3%) and is coincident with the cooling of the Canadian housing market. According to the Canadian Mortgage Housing Corporation, housing starts in the third quarter of 2006 were at their lowest level since the first quarter of 2005. Still, sales in this group of stores have been rising at double digit annual rates since 2002.

Partially offsetting these declines were gains in the food and beverage stores sector. Within this sector, both supermarkets and beer, wine and liquor stores sales rose by 0.4%. Convenience and specialty food stores sales continued to climb in October with a 0.3% increase. Sales have been fairly healthy in 2006 for this group of stores with only one slight decline in July.

Pharmacies and personal care stores sales were relatively flat in October (+0.1%), marking the 12th consecutive monthly sales increase for this retail sector. Sales in these types of stores have been fairly strong since the start of 2006. After a near-record quarterly growth of 4.7% ending June, sales gains slowed in the third quarter but were still strong at 2.7%.

Widespread declines across the country

Continued weakness in the automotive sector and a slowdown in back-to-school shopping caused sales to decline in 12 of the 13 provinces and territories in October.

In October, retail sales fell for the second consecutive month in Quebec (-1.3%) and Ontario (-0.6%). Previously, sales in Quebec had been generally growing since the fall of 2005. In Ontario, fluctuating sales have made the sales trend in this province relatively flat since April 2006.

Retail growth stalled in Alberta (-0.1%) and British Columbia (-0.1%), as sales failed to advance for the second month in a row. Despite the modest declines of late, year-over-year increases in Alberta remained consistently above 15% for each month in 2006.

Saskatchewan (-2.2%) and Manitoba (-2.1%) both experienced declines in retail sales in October. October's weakness was only the second monthly sales decline in Manitoba in 2006.

Yukon was the only territory that registered a sales gain (+0.2%) in October.

Related indicators for November

Employment edged up an estimated 22,000 in November, the result of gains in part-time work. The unemployment rate rose 0.1 percentage points to 6.3%, as more people entered the labour market in search of work.

The seasonally adjusted annual rate of housing starts increased marginally to 225,000 units in November, from 223,200 units in October, according to the Canada Mortgage and Housing Corporation.

Preliminary sales data from the auto industry indicate that November sales are expected to rise by approximately 3.0%, mainly due to increased demand for passenger cars.

Available on CANSIM: tables 080-0014 to 080-0017.

Definitions, data sources and methods: survey numbers, including related surveys, 2406 and 2408.

The October 2006 issue of Retail Trade (63-005-XWE, free) will soon be available.

Data on retail trade for November will be released on January 23, 2007.

For more information or to order data, contact Client Services (toll-free 1-877-421-3067; 613-951-3549; For analytical information, or to enquire about the concepts, methods or data quality of this release, contact Lucy Chung (613-951-1903), Distributive Trades Division.

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