Alberta consumer spending gives off mixed messages

Spending is down in the retail and automotive sectors but up at restaurants and bars across the province: ATB

Mario ToneguzziThere are some mixed messages this month on the mood of Alberta consumers.

There’s no question the province’s energy sector continues to struggle. The Conference Board of Canada recently predicted Alberta would experience a minor recession this year – its third in five years following the collapse of oil prices in the last half of 2014.

Naturally, that economic uncertainty greatly impacts the ability and willingness of Albertans to spend.

But it actually depends on where they’re spending. Spending is down in the retail and automotive sectors but up at restaurants and bars across the province.

ATB Financial’s Economics & Research Team says weak consumer spending is both a reflection of the overall weakness in the provincial economy and a contributor to it. 

Alberta consumers spent about $26 million less in June than they did in May, a drop of 0.4 per cent in the retail sector. Sales were also down compared to the previous June, by 1.1 per cent.

In its daily economic update, The Owl, ATB said June was the second month in a row in which sales contracted and spending was down in four of the first six months of 2019. Average sales over the January to June period were off by 0.2 per cent compared to the 2018 average.

“Depressed new vehicle sales ​ and lower gas prices at the pump in June were key factors in the overall decline but unadjusted revenue was down in seven of the 11 main retail subsectors on a year-over-year basis. The exceptions were health and personal care stores, clothing stores and miscellaneous retailers. The latter includes, for example, florists, office supplies stores, stationery stores, gift, novelty and souvenir stores, used merchandise stores, pet and pet supplies stores, art dealers and cannabis stores,”  said ATB.

“Since legal cannabis stores opened in October of last year, (unadjusted) monthly sales in Alberta reached $18.4 million in June.”

ATB also said that the buying of new trucks and cars in Alberta was down in June for the 13th month in a row.

“It is yet another confirmation of the province’s sluggish pace of economic growth,” it said.

Albertans bought about 19,000 new vehicles in June, a drop of 0.8 per cent compared to May and 6.9 per cent compared to the previous June. The dollar value of the vehicles sold was also down, falling from about $912 million in May to $906 million in June. The average cost of the vehicles was $47,512, explained ATB.

“Car sales are down more than those of trucks. Car sales were off by 19.4 per cent on a year-over-year basis compared to a 4.3 per cent drop for trucks. The truck category includes light and heavy trucks, minivans, sport utility vehicles, vans, coaches and buses.”

But one area that has seen positive spending growth is the food services and drinking places sector.

“While not a precise economic barometer, it’s generally a positive sign to see restaurant and bar sales rising. However, it does not necessarily translate into higher profits for restaurant and bar owners as it does not take into account operating costs,” said ATB.

“Despite the sluggish economy, seasonally-adjusted restaurant and bar sales in Alberta were up by 2.8 per cent in June compared to a year earlier. Annual sales are on pace to be 1.6 per cent higher than in 2018, roughly the same rate of growth seen last year.

“The data from Statistics Canada suggest enough Albertans (and visitors to the province) are opting to go out to a restaurant or bar – and spend enough while doing so – to increase total sales over the first half of the year. For certain, this is a better sign than if sales were flat or falling.

“A caveat to this general conclusion is that a sluggish economy might be leading more Albertans to stay in the province rather than travel beyond its borders and, in turn, to spend more at local restaurants and bars than they otherwise would.

“So, while we don’t want to read too much into this slight rise in sales, it is still encouraging to see them growing at roughly the same pace as last year rather than returning to the anemic growth (0.1 per cent) experienced during the depths of the recent recession.”

Mario Toneguzzi is a Troy Media business reporter based in Calgary.

© Troy Media

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