Canadians eager to shop after staying home earlier in the year to stop the spread of COVID-19 boosted retail sales above pre-pandemic levels in June, though a fall retreat is likely as government stimulus measures and worries about a possible second wave of cases hurt consumer confidence.
"We think this is more of a temporary burst and that we're going to see a pullback as we come into the fall season and close to the winter season as well," said Robert Carter, industry adviser with StratonHunter Group.
Retail sales soared 23.7 per cent in June to $53.0 billion, according to Statistics Canada figures released Friday, which also revised its reading for May to show a gain of 21.2 per cent, up from its earlier estimate of 18.7 per cent.
The June sales were 1.3 per cent higher than in February, the last month before broad shutdowns were ordered by public health officials to slow the spread of the COVID-19 pandemic, the agency said.
Economists on average had expected an increase of 24.5 per cent for June, according to financial markets data firm Refinitiv.
TD Bank economist Ksenia Bushmeneva said the rebound in retail sales looked "pretty V-shaped," a reference to a quick recovery from a sharp decline.
"Sales continued their recovery in June alongside the reopening process, regaining all ground lost in the pandemic and then some," Bushmeneva wrote in a report.
"Strong motor vehicles continue to supercharge the sales numbers. Significant pent-up demand is also giving a boost to several other categories, such as clothing and furniture, where the impact of the mandatory shutdowns was most extensive."
Carter said consumers are split into three groups, with one-third continuing to stay at home as much as possible and one-third on the fence about going out to shop.
The remainder "are the folks that are feeling very pent up," he said, noting they were the first to venture out when governments allowed restaurants and shops to reopen.
This group is "very aggressively out spending," Carter said.
Despite the large gains, the trend seen in May and June is not expected to continue. Early estimates suggest retail sales increased by 0.7 per cent in July, said Statistics Canada.
The $500 weekly Canada Emergency Response Benefit is set to wind down starting next month. A new benefit that pays $400 a week for up to 26 weeks will replace CERB for those ineligible for employment insurance.
StratonHunter is expecting an increase in layoffs in the fall and into the winter, said Carter and that will impact consumer confidence.
Ongoing uncertainty around the spread of COVID-19 also doesn't help, said Carter, noting many believe once schools reopen there may be an uptick in cases.
CIBC senior economist Royce Mendes and the stalling of momentum in retail sales and potential for backsliding paints a picture of a long and bumpy road ahead for the economy.
"That said, the extension and augmentation of some unemployment benefits will help support household spending, offsetting some of the drag from the still-high unemployment rate," Mendes said.
Retail sales in June were up across all of the subsectors with the motor vehicle and parts dealers group up 53.4 per cent.
Sales at non-essential retailers also surged higher, with clothing and clothing accessories stores posting a 142.3 per cent gain in June.
Furniture and home furnishing stores saw sales rise 70.9 per cent, while building material and garden equipment and supplies dealers added 13.0 per cent. Sales at sporting goods, hobby, book and music stores rose 64.9 per cent.
For the second quarter, Statistics Canada said retail sales were down 13.3 per cent compared with the first quarter.
This report by The Canadian Press was first published Aug. 21, 2020.
Craig Wong and Aleksandra Sagan, The Canadian Press