COVID-19's 3rd wave walloped retailers in April and May looks to have been even worse

Retail sales fell by almost six per cent in April, the biggest slump in a year, as the third wave of COVID-19 across Canada closed stores and kept shoppers' wallets tightly shut.

Statistics Canada reported Wednesday that nine of 11 retail sectors saw lower sales. The two exceptions were food and beverage stores, and miscellaneous retailers, both of which saw slight increases during the month.

So-called core retail sales which strip out volatile items like gas station receiptsand vehicle purchases fell by even more, 7.6 per cent. That's the second-biggest decline ever, only outstripped by the decline seen the same month a year earlier when COVID-19 was only beginning.

TD Bank economist Ksenia Bushmeneva noted that vehiclesales were down not only because of COVID lockdowns but also because of theongoing shortage of microchips, limiting their inventory and weighing on sales that month.

"While the microchip shortage may persist for some time, other headwinds will ease," she said.

Sales of things considered to be "non-essential" fell off a cliff, mostly because many provinces implemented lockdowns during the month that made it next to impossible to buy things like clothes, shoesand most types of furniture and electronics.

Ontario and Manitoba had the harshest lockdowns in April, so most of the retail sales decline came from those two provinces. If they are stripped out, sales were down by 0.7 per cent, Bank of Montreal economist Doug Porter calculates.

"With the country now in various stages of reopening, we look for a hearty snap-back in sales in June and July," he said."However, note that even with the big decline in April (and May) activity, retail sales volumes are still above pre-pandemic levels so the rebound may not fully reverse these latest sags."

Online shopping also slowed

Online sales exploded during the pandemic, but the closure of physical stores in April doesn't seem to have moved any more spending online during the month, with sales actually slipping by 0.4 per cent from March's level to just over $4 billion.That's still 7.4 per cent more than Canadians were buying online a year ago, however.

Preliminary numbers for May suggest retail sales fell another 3.2 per cent from April's low level. While the numbers for the two-month stretch of April and May certainly don't look great,they didn't come as a surprise to Porter, who is optimistic that a rebound is coming later in the year now that Canada's vaccination campaign is in high gear.

"While today's downbeat report is a look deep into the rear-view mirror, it reveals the full extent of the third-wave restrictions with retail at the forefront of the economic pain," Porter said.