Housing & Economy

Sentiment fell sharply across the services sector in May amid rapid increases in costs and prices, and a worsening growth outlook.

That’s according to the latest CBI Service Sector Survey, based on responses from 174 services firms and conducted between 28 April and 13 May.

Growth in consumer services came to a standstill, with business volumes flat in the three months to May and expected to contract in the quarter ahead. By contrast, business and professional services firms reported that growth in business volumes accelerated last quarter, though volumes are predicted to be flat in the quarter ahead.

Costs and average selling prices in the services sector grew rapidly once again over the three months to May. Business and professional services firms expect selling price inflation to accelerate a little further in the three months to August, but the pace of price inflation in consumer services is expected to slow somewhat as demand also cools. Services firms are sharing the burden of higher costs with their customers/clients, with profitability falling in both sub-sectors for the second quarter in a row and a further fall expected next quarter.

Ben Jones, CBI Lead Economist, said:

“Services firms are feeling pretty despondent about their immediate prospects in the face of cost pressures and high inflation. The squeeze on household incomes is already having an impact on activity in consumer services, with fears of worse to come over the summer.

“Businesses across the services sector are continuing to hire new staff and although concerns over shortages of labour are still widespread, they have eased a bit. But falling profitability is beginning to take its toll on investment plans, which have softened.

“The Government should act now in support of those on lower incomes but also help restore business confidence and get firms investing. An extension to the successful Recovery Loan Scheme would be an astute move as the cash flow crunch continues for firms.”

Business & professional services

• Business optimism fell at the fastest pace since November 2020 (balance of -21%, from +9% in the quarter to February)
• Business volumes grew strongly last quarter (+28%, from +3%) but are expected to be broadly unchanged next quarter (-1%)
• Costs per person employed grew at a survey record pace (+64%, from +62%) in the three months to May, with expectations pointing to a further increase next quarter (+67%)
• Average selling prices also rose at the fastest rate on record (+23%, from +20%), and expectations for the next quarter were the highest on record (+29%).
• Profitability fell for a second consecutive quarter (-12%, from -19%) with the expectations for a further decline in the coming quarter (-19%)
• Employment continued to grow strongly in the last quarter (+33%, from +23%) and headcount is expected to rise at a similar pace in the quarter to August (+36%)
• Spending on training/retraining rose at an above average pace last quarter (+27% ,from +19%; vs average of +7%), and is tipped to rise further next quarter (+23%)
• Growth in investment in IT is expected to pick in the 12 months ahead (+28%, from +20%), but spending on vehicles, plant & machinery is set to be unchanged (+2%, from +20%). Spending on land and buildings is set to be cut back further (-10%, from -12%).

Consumer services

• Optimism about the general business situation fell in the quarter to May (balance of -23%, from +13% in the quarter to February)
• Business volumes were flat over the last three months (0%, from +10%) and are expected to fall next quarter (-23%)
• Costs continued to rise at a historically strong pace (+77%, from +65%) with the rate expected to pick up next quarter (+85%)
• Average selling prices rose at the fastest pace since November 2006 (+47%, from +42%), although the rate of increase is expected to temper slightly next quarter (+37%)
• Stronger cost pressures weighed on profitability (-21%, from -11%) with consumer services firms expecting profitability to deteriorate further in the next quarter (-47%)
• Employment edged up slightly in the quarter to May (+5%, from +18%) with a stronger increase in headcount expected in the quarter to August (+23%)
• Spending on training/retraining was broadly flat last quarter (-2%, from +42%), but growth is expected to accelerate next quarter (+17%)
• Investment intentions for the year ahead remained above average, but have softened since February across all categories: IT (+25%, from 53%); vehicles, plant & machinery (+19%, from +36%), land & buildings (+8%, from +22%).

Personal income increased $89.3 billion (0.4 percent) in April, according to estimates released today by the Bureau of Economic Analysis (tables 3 and 5). Disposable personal income (DPI) increased $48.3 billion (0.3 percent) and personal consumption expenditures (PCE) increased $152.3 billion (0.9 percent).

Real DPI increased less than 0.1 percent in April and Real PCE increased 0.7 percent; goods increased 1.0 percent and services increased 0.5 percent (tables 5 and 7). The PCE price index increased 0.2 percent. Excluding food and energy, the PCE price index increased 0.3 percent (table 9).

                                                                       2021                   2022
                                                                       Dec.    Jan.    Feb.    Mar.    Apr.
                                                                 Percent change from preceding month
Personal income:     
     Current dollars                                           0.5      0.1      0.6      0.5      0.4
Disposable personal income:     
     Current dollars                                           0.3     -0.9      0.5      0.4      0.3
     Chained (2012) dollars                             -0.2     -1.4      0.0     -0.5      0.0
Personal consumption expenditures (PCE):     
     Current dollars                                          -0.9      2.1      0.6      1.4      0.9
     Chained (2012) dollars                             -1.4      1.5      0.1      0.5      0.7
Price indexes:     
     PCE                                                           0.5      0.5      0.5      0.9      0.2
     PCE, excluding food and energy               0.5      0.4      0.3      0.3      0.3
Price indexes:                                       Percent change from month one year ago
     PCE                                                           5.8      6.0      6.3      6.6      6.3
     PCE, excluding food and energy               4.9      5.1      5.3      5.2      4.9

The increase in personal income in April primarily reflected an increase in compensation and personal income receipts on assets that were partly offset by a decrease in proprietors' income (table 3). Within compensation, the increase reflected increases in both private and government wages and salaries. The increase in personal income receipts on assets was led by personal dividend income. The decrease in proprietors' income was led by nonfarm income.

The $152.3 billion increase in current-dollar PCE in April reflected an increase of $48.6 billion in spending for goods and a $103.7 billion increase in spending for services (table 3). Within goods, increases were widespread across all components except for gasoline and other energy goods; spending for motor vehicles and parts was the leading contributor to the increase. Within services, increases were also widespread across all components, led by food services and accommodations as well as housing and utilities. Detailed information on monthly PCE spending can be found on Table 2.3.5U.

Personal outlays increased $155.3 billion in April (table 3). Personal saving was $815.3 billion in April and the personal saving rate—personal saving as a percentage of disposable personal income—was 4.4 percent (table 1).

The PCE price index for April increased 6.3 percent from one year ago, reflecting increases in both goods and services (table 11). Energy prices increased 30.4 percent while food prices increased 10.0 percent. Excluding food and energy, the PCE price index for April increased 4.9 percent from one year ago.

Annual Update of the National Economic Accounts
BEA will release results from the 2022 annual update of the National Economic Accounts, which includes the National Income and Product Accounts as well as the Industry Economic Accounts, on September 29, 2022. This update will present revised statistics for GDP, GDP by Industry, and gross domestic income that cover the first quarter of 2017 through the first quarter of 2022. Updated monthly personal income and outlays will be released on September 30, along with the August 2022 estimate. For details, refer to Information on Updates to the National Economic Accounts.

Updates to Personal Income and Outlays

Estimates have been updated for October through March. For October through December, estimates for compensation, personal taxes, and contributions for government social insurance reflect the incorporation of the most recently available fourth-quarter wage and salary data from the Bureau of Labor Statistics’ Quarterly Census of Employment and Wages program. Revised and previously published changes from the preceding month for current-dollar personal income, for current-dollar and chained (2012) dollar DPI and PCE, and for PCE and PCE, excluding food and energy price indexes are shown below for February and March.

                                                                                                       Change from preceding month
                                                                                    February                                                           March
                                                           Previous    Revised    Previous    Revised    Previous    Revised    Previous    Revised
                                                     (Billions of dollars)    (Percent)    (Billions of dollars)    (Percent)
Personal income:     
     Current dollars                                 153.9        132.6          0.7             0.6           107.2        116.9           0.5             0.5
Disposable personal income:     
     Current dollars                                 121.8          94.6          0.7             0.5             89.7          79.9           0.5             0.4
     Chained (2012) dollars                      22.6           -1.7          0.1             0.0            -57.7         -69.5         -0.4            -0.5 
Personal consumption expenditures:     
     Current dollars                                 102.9        101.2          0.6             0.6           185.0        230.3           1.1             1.4
     Chained (2012) dollars                      14.3          10.8          0.1             0.1             33.6          66.4           0.2             0.5
Price indexes:     
     PCE                                                     --               --            0.5             0.5                --              --              0.9             0.9
     PCE, excluding food and energy         --               --            0.3             0.3                --              --              0.3             0.3
 

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Next release: June 30, 2022, at 8:30 A.M. EDT
Personal Income and Outlays, May 2022

Final Results for May 2022

Next data release: Friday, June 10, 2022 for Preliminary June data at 10am ET

Surveys of Consumers Marks Leadership Change

Surveys of Consumers Director Joanne Hsu
The final May reading confirmed the early month decline in consumer sentiment, which fell 10.4% below April and reverted to virtually the same level of sentiment seen in March. This recent drop was largely driven by continued negative views on current buying conditions for houses and durables, as well as consumers’ future outlook for the economy, primarily due to concerns over inflation. At the same time, consumers expressed less pessimism over future prospects for their personal finances than over future business conditions. Less than one quarter of consumers expected to be worse off financially a year from now. Looking into the long term, a majority of consumers expected their financial situation to improve over the next five years; this share is essentially unchanged during 2022. A stable outlook for personal finances may currently support consumer spending. Still, persistently negative views of the economy may come to dominate personal factors in influencing consumer behavior in the future.

Real gross domestic product (GDP) decreased at an annual rate of 1.5 percent in the first quarter of 2022 (table 1), according to the "second" estimate released by the Bureau of Economic Analysis. In the fourth quarter, real GDP increased 6.9 percent.

The GDP estimate released today is based on more complete source data than were available for the "advance" estimate issued last month.  In the advance estimate, the decrease in real GDP was 1.4 percent. The update primarily reflects downward revisions to private inventory investment and residential investment that were partly offset by an upward revision to consumer spending (refer to "Updates to GDP").

The decrease in real GDP reflected decreases in private inventory investment, exports, federal government spending, and state and local government spending, while imports, which are a subtraction in the calculation of GDP, increased. Personal consumption expenditures (PCE), nonresidential fixed investment, and residential fixed investment increased (table 2).

COVID-19 Impact on the First-Quarter 2022 GDP Estimate
In the first quarter, an increase in COVID-19 cases related to the Omicron variant resulted in continued restrictions and disruptions in the operations of establishments in some parts of the country. Government assistance payments in the form of forgivable loans to businesses, grants to state and local governments, and social benefits to households all decreased as provisions of several federal programs expired or tapered off. The full economic effects of the COVID-19 pandemic cannot be quantified in the GDP estimate for the first quarter because the impacts are generally embedded in source data and cannot be separately identified. For more information, refer to the Technical Note and Federal Recovery Programs and BEA Statistics.

The decrease in private inventory investment was led by decreases in wholesale trade (mainly motor vehicles) as well as mining, utilities, and construction (notably, utilities). Within exports, widespread decreases in nondurable goods were partly offset by an increase in "other" business services (mainly financial services). The decrease in federal government spending primarily reflected a decrease in defense spending on intermediate goods and services. The increase in imports was led by increases in durable goods (notably, nonfood and nonautomotive consumer goods).

The increase in PCE reflected widespread increases in services (led by housing and utilities). Within goods, an increase in durable goods (led by motor vehicles and parts) was offset by a decrease in nondurable goods (led by gasoline and other energy goods). The increase in nonresidential fixed investment reflected increases in equipment and intellectual property products.

Current‑dollar GDP increased 6.5 percent at an annual rate, or $381.5 billion, in the first quarter to a level of $24.38 trillion. In the fourth quarter, GDP increased 14.5 percent, or $800.5 billion (table 1 and table 3). More information on the source data that underlie the estimates is available in the "Key Source Data and Assumptions" file on BEA's website.

The price index for gross domestic purchases increased 8.0 percent (revised) in the first quarter, compared with an increase of 7.0 percent in the fourth quarter (table 4). The PCE price index increased 7.0 percent, compared with an increase of 6.4 percent. Excluding food and energy prices, the PCE price index increased 5.1 percent (revised), compared with an increase of 5.0 percent.

Personal Income

Current-dollar personal income increased $248.3 billion (revised) in the first quarter to a level of $21.26 trillion. In the fourth quarter, personal income increased $186.3 billion (revised). The increase primarily reflected an increase in compensation that was partly offset by a decrease in government social benefits (table 8). In the first quarter, government assistance payments in the form of social benefits to households decreased as provisions of several federal programs expired or continued to taper off.

Disposable personal income decreased $7.5 billion (revised), or 0.2 percent, in the first quarter, in contrast to an increase of $72.4 billion (revised), or 1.6 percent, in the fourth quarter. Real disposable personal income decreased 6.7 percent (revised), compared with a decrease of 4.5 percent (revised).

Personal saving was $1.03 trillion (revised) in the first quarter, compared with $1.45 trillion (revised) in the fourth quarter. The personal saving rate—personal saving as a percentage of disposable personal income—was 5.6 percent (revised) in the first quarter, compared with 7.9 percent (revised) in the fourth quarter.

Gross Domestic Income and Corporate Profits

Real gross domestic income (GDI) increased 2.1 percent in the first quarter, compared with an increase of 6.3 percent (revised) in the fourth quarter. The average of real GDP and real GDI, a supplemental measure of U.S. economic activity that equally weights GDP and GDI, increased 0.3 percent in the first quarter, compared with an increase of 6.6 percent (revised) in the fourth quarter (table 1).

Profits from current production (corporate profits with inventory valuation and capital consumption adjustments) decreased $66.4 billion in the first quarter, in contrast to an increase of $20.4 billion in the fourth quarter (table 10).

Profits of domestic financial corporations decreased $28.6 billion in the first quarter, compared with a decrease of $1.3 billion in the fourth quarter. Profits of domestic nonfinancial corporations decreased $21.1 billion, in contrast to an increase of $5.0 billion. Rest-of-the-world profits decreased $16.7 billion, in contrast to an increase of $16.8 billion. In the first quarter, receipts increased $21.3 billion, and payments increased $38.0 billion.

Updates to GDP

The decrease in first-quarter real GDP was revised down 0.1 percentage point from the "advance" estimate, primarily reflecting downward revisions to private inventory investment and residential fixed investment that were mostly offset by upward revisions to consumer spending and exports. Imports were revised up. For more information, refer to the Technical Note. For information on updates to GDP, refer to the "Additional Information" section that follows.

Updates to Fourth-Quarter Wages and Salaries

In addition to presenting updated estimates for the first quarter, today's release presents revised estimates of fourth-quarter 2021 wages and salaries, personal taxes, and contributions for government social insurance, based on updated data from the Bureau of Labor Statistics Quarterly Census of Employment and Wages program. Wages and salaries are now estimated to have increased $341.0 billion in the fourth quarter, an upward revision of $66.6 billion. With the incorporation of these new data, real gross domestic income is now estimated to have increased 6.3 percent in the fourth quarter, an upward revision of 1.2 percentage points from the previously published estimate.

Annual Update of the National Economic Accounts
BEA will release results from the 2022 annual update of the National Economic Accounts, which includes the National Income and Product Accounts as well as the Industry Economic Accounts, on September 29, 2022. This update will present revised statistics for GDP, GDP by Industry, and gross domestic income that cover the first quarter of 2017 through the first quarter of 2022. For details, refer to Information on Updates to the National Economic Accounts.
*          *          *

Next release, June 29, 2022 at 8:30 A.M. EDT
Gross Domestic Product (Third Estimate)
Corporate Profits (Revised Estimate)
Gross Domestic Product by Industry
First Quarter 2022

Retail sales were virtually unchanged in March. Sales were up in 10 of 11 subsectors, led by higher sales at gasoline stations (+7.4%). Lower sales at motor vehicle and parts dealers (-6.4%) erased the gains observed in the remaining subsectors.

Sales were up in 10 of 11 subsectors, representing 75.0% of retail trade.

Core retail sales—which exclude gasoline stations and motor vehicle and parts dealers—increased 1.5% in March.

In volume terms, retail sales were down 1.0% in March.

Retail sales were up 3.0% in the first quarter of 2022. This was the largest quarterly increase since the third quarter of 2020. In volume terms, quarterly sales edged up 0.2%.

Given the continually evolving economic situation, Statistics Canada is providing an advance estimate of retail sales, which suggests that sales increased 0.8% in April 2022. Owing to its early nature, this figure will be revised. This unofficial estimate was calculated based on responses received from 54.3% of companies surveyed. The final average response rate for the survey over the previous 12 months has been 92.1%.

Chart 1: Retail sales virtually unchanged in March

Sales at gasoline stations rise while sales at motor vehicle and parts dealers decline
Receipts at gasoline stations were up 7.4% in March. This was the third consecutive increase and tenth gain in the last 11 months. In volume terms, sales were up 3.1%. Gasoline prices rose 11.8% on a monthly basis, partly due to uncertainty surrounding supply following Russia's invasion of Ukraine.

Sales fell 6.4% at motor vehicle and parts dealers, led by lower sales at new car dealers (-5.9%). This was the largest decline at motor vehicle and parts dealers since sales plunged 42.8% at the onset of the COVID-19 pandemic in April 2020. The Bank of Canada's Monetary Policy Report noted that semiconductor chip shortages are continuing to impact production and prices for motor vehicles. The report also noted that while consumption growth for most goods is expected to moderate, spending on motor vehicles should pick up as supply chain shortages ease.

Core retail sales rise
Leading the increase in core retail were higher sales at building material and garden equipment and supplies dealers (+3.7%). Sales were up for the seventh time in the last eight months.

Receipts rose 0.9% at food and beverage stores, led by higher sales at supermarkets and other grocery stores (+1.6%). The Consumer Price Index noted that food prices continued to rise in March, up 8.7% from the previous year. Higher input prices and transportation costs have continued to impact grocery prices.

Sales were also up at miscellaneous store retailers (+5.9%) and clothing and clothing accessories stores (+2.2%).

Chart 2: Sales increase in 10 of the 11 subsectors in March

Sales increase in four provinces
Retail sales were up in four provinces in March, led by higher sales in Alberta (+1.8%). Higher sales at gasoline stations led the gain in this province.

Sales rose 0.3% in Ontario, also on higher sales at gasoline stations. In contrast, sales edged down 0.3% in the census metropolitan area (CMA) of Toronto.

In March, lower sales were observed in Quebec (-0.8%), British Columbia (-0.5%) and Saskatchewan (-1.6%).

Retail e-commerce sales in Canada
On a seasonally adjusted basis, retail e-commerce sales were down 1.9% in March.

On an unadjusted basis, retail e-commerce sales fell 24.6% year over year to $3.0 billion in March, accounting for 4.9% of total retail trade. The share of e-commerce sales out of total retail sales fell 1.9 percentage points compared with March 2021.

Note to readers
All data in this release are seasonally adjusted and expressed in current dollars, unless otherwise noted.

Seasonally adjusted data are data that have been modified to eliminate the effect of seasonal and calendar influences to allow for more meaningful comparisons of economic conditions from period to period. For more information on seasonal adjustment, see Seasonally adjusted data – Frequently asked questions.

The percentage change for the advance estimate of retail sales is calculated using seasonally adjusted data and is expressed in current dollars.

This early indicator is a special product being provided in the context of the COVID-19 pandemic to offer Canadians timely information on the retail sector. The data sources and methodology used are the same as those outlined on the Monthly Retail Trade Survey information page.

Trend-cycle estimates are included in selected charts as a complement to the seasonally adjusted series. These data represent a smoothed version of the seasonally adjusted time series and provide information on longer-term movements, including changes in direction underlying the series. For information on trend-cycle data, see Trend-cycle estimates – Frequently asked questions.

Both seasonally adjusted data and trend-cycle estimates are subject to revision as additional observations become available. These revisions could be extensive and could even lead to a reversal of movement, especially for the reference months near the end of the series or during periods of economic disruption.

Seasonally adjusted estimates for cannabis store retailers are presented in unadjusted form since no seasonal pattern has been established by official statistics yet. Establishing such a pattern requires several months of observed data. In the interim, the seasonally adjusted estimates for cannabis store retailers will be identical to the unadjusted figures.

Statistics Canada's retail e-commerce figures include the electronic sales of two distinct types of retailers. The first type does not have a storefront. These businesses are commonly referred to as pure-play Internet retailers and are classified under the North American Industry Classification System (NAICS) code 45411—electronic shopping and mail-order houses. The second type has a storefront and is commonly referred to as a brick-and-mortar retailer. If the online operations of a brick-and-mortar retailer are separately managed, they, too, are classified under NAICS code 45411.

Some common e-commerce transactions, such as travel and accommodation bookings, ticket purchases, and financial transactions, are not included in Canadian retail sales figures.

For more information on the Bank of Canada Monetary Policy Report, please consult the report here.

For more information on retail e-commerce in Canada, see "Retail E-Commerce in Canada."

Total retail sales expressed in volume terms are calculated by deflating current-dollar values using consumer price indexes.

Find more statistics on retail trade.

Real-time tables
Real-time tables 20-10-0054-01 and 20-10-0079-01 will be updated soon.

Next release
Data on retail trade for April will be released on June 21, 2022.

Contact information
For more information, or to enquire about the concepts, methods or data quality of this release, contact us (toll-free 1-800-263-1136; 514-283-8300; infostats@statcan.gc.ca) or Media Relations (statcan.mediahotline-ligneinfomedias.statcan@statcan.gc.ca).

Industry Intelligence Editor's Note: This press release omits select charts and/or marketing language for editorial clarity. Click here to view the full report.