Alberta Retail Sales Fall

Tuesday, September 23, 2008

Alberta was the only province in the country in July to see year-over-year retail sales
drop into negative territory
, according to data released Monday by Statistics Canada.

The federal agency said retail sales in this province declined by 0.9 per cent from July 2007 to July 2008 while at the national level retail sales have increased by 4.9 per cent.


[Insert record scratching sound here]

Alberta leads the nation in real estate price declines and now in retail activity. In consideration to the economic decline of the manufacturing sector in Eastern Canada, this simply shows that the "solid economic fundamentals" may not be solid afterall.

"Using the year-over-year level of sales alone, it would be tempting to
conclude that Alberta has the weakest economy in the country," said Hirsch. "It
was the only province where sales in July were lower than last year.

"But that impression would be incorrect. Sales per person in Alberta are
still by far the highest in the country."

He said that at $1,455 per person, retail spending in the province is 34 per cent higher than the national average of $1,083. But Hirsch said even that figure has come down over the past year. In 2006, retail spending in Alberta, he said, was more than 40 per cent above the national average.

Spending more than the average Canadian should not be used to as a metric of economic health. Albertans may make more money than an average Canada. This then equates to greater spending statistics. But Alberta is an inflationary (and CPI) leader in the nation so it is all relative. Consumer confidence is vital in triggering spending in an economy. In Alberta, we are constantly reminded that we live in the most financially insulated place on Earth. With that instilled confidence, retail activity should not be faltering. Perhaps the reassuring fundamentals were exaggerated? With the current global financial crisis, consumer confidence will not return to the utopia levels of the boom years. This will hurt demand for real estate. As seen in the recent pending sales statistics, there isn't a significant push in demand. Despite the new mortgage rules coming into affect on October 15, 2008, this shift in consumer spending will further downward pressure on home prices.

One simple explanation why retail activity may be down is that Albertans no longer have disposable income after bills and other necessary expenditures. The opportunity cost of carrying a large mortgage, discretionary income becomes a scarcity.


I believe the term is being "house poor."

As house prices continue to slide, it will be interesting to see what many upside down Albertans will do when they reevaluate their financial well-being.

13 comments:

Anonymous said...

Cant wait to see them thar Calgary double priced shacks equal to their real value.

Calgary rip off!!

Anonymous said...

Interesting comment.

I've always thought that if you spend a higher percentage of your income on housing, you will have less for other things.

The housing bubble turned this logic upside down, as increases in housing prices caused homeowners to borrow more against this increased "equity", allowing them to spend even more.

I guess many forgot that borrowing against "equity" is not income, but rather debt, which must be paid back in the future, along with interest.

Once house prices stop rising (or start falling), this magical home-equity ATM goes into reverse, with homeowners no longer increasing debt to fund purchases. Some even might start to pay down debt (gasp!). This means that less is spend on other things. It is not surprising that retail sales will not increase at the previous pace.

This is bad news for the commercial landlords, as sales per square foot will likely stagnate or decline over the coming years. It is good news however for those wanting to start a small retail business, as rents and competition for retail space are likely to decrease going foreword.

Anonymous said...

RJT - think HELOCS drying up.

Anonymous said...

what happened to link to radleys blog

Anonymous said...

I think Radley removed the link to crebb far in advance.

Anonymous said...

to put it in perspective... last month I considered accepting a promotion in Calgary... I make $110,000/yr, allowing in our current location, (above average cost of living spot in the US, but we are Canadian so were looking for a way home) for a mortage, car payment, and a little for savings etc, and for my spouse to stay home raising kids...

I called my bank in Canada went throught the dog and pony show to get a pre-approval amount... and was declined!!! (BTW my Canadian fico score is in the low 700's) The reasoning given was that my 15% equity I have in my current home is only worth 4% in the equivient sized home in the Calgary market. and under the new rules you have to have 5% come Oct 1 or whatever.

so in a nutshell, when the new rules kick in, less than 5% of the population will be able to buy into the market. (unless your already in the overinflated market that is) hmm not sure who's gonna buy all those houses?

needless to say, I've turned down the promotion and will be stitting where I am for a couple years.

Luck to you all up North... (your gonna need it)

Anonymous said...

This is a comment for the man who was turned down by his bank..I am a mortgage broker with TMG The Mortgage Group, there is no way you should have been turned down with a 700 FICO score, no way! That is an excellent score. This is why people should not always use the bank to qualify for a mortgage. I went thru 4 years of this crap with the bank to only get nowhere. If your still interested I would be glad to help you and your family out with perhaps looking at a different lender for you that would approve you! You can call me at 1-866-584-4703 and I would love to help you out. I can get same day approvals for you as well, providing the lender has all criteria needed in the application to approve. Please, give me a call, with a FICO score in the low 700's and with 15% equity...there is no way you should have been declined! What price of house were you looking at? Brokers have more creative ways to find ways to get your application to work.
Thanks..regards Brenda Palmer
www.mydreamhomemortgage.ca

das said...

Retail Home Sales Business means the business of selling or the offering for sale of manufactured
homes, mobile homes or package homes, or any of the units or materials constituting those homes, to an individual for use as a residence.A direct sales contract is a contract for goods or services worth more than $25, and that is negotiated or concluded in person at a place other than the seller’s place of business. The goods or services must be for personal or household use.

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