Rising inflation, mediocre wage gains temper retail forecast as economy muddles through post-Carney era
March 12, 2014
/CNW/ - Retailers in
are expected to sell less this year but at higher prices, reflecting rising energy costs and a weaker dollar, amid lacklustre wage and employment growth as
economy strives to find its footing, says a new report from CIBC World Markets Inc.
"We will see a complete U-turn from what we saw last year, in which retailers moved greater volumes as consumers' purchasing power benefited from softer inflation," says
, Chief Economist at CIBC. "The next two years will see a gradual upturn in inflation, in part a reflection of a weaker Canadian dollar but also capturing higher energy costs and a tobacco tax hike. So, quarterly growth rates (in retail sales) will see a trend towards selling less for more: higher prices, but leaner growth in real volumes."
The one constant is that relatively flat wage and employment gains in 2013 translated into mediocre growth in Canadians' household wallets, he says. In nominal terms, disposable income growth has been slowing, rising by only 3.6 per cent last year, the weakest non-recessionary showing since 1996, the report finds.
"Improvements on that front aren't likely to be seen until 2015, when tighter job markets should generate some labour bargaining power," says Mr. Shenfeld, noting that typically average hourly wages don't climb at anything above 3 per cent unless the output gap - the difference between the economy's actual and potential output --- has been closed.
Income patterns help to explain the appeal of dollar, or bargain, stores, which have been the big winners in the retail space, he says.
Increasingly, wage gains have been tilted to a select group of higher-paid sectors, says Mr. Shenfeld. The average wage in the past year rose 2.5 per cent but the median wage climbed only 1 per cent, extending a more than decade-old pattern in which the ratio of the average-to-the-median wage has been widening, he says.