ECONOMIC NEWS

François Dupuis, Vice-President and Chief Economist • Mathieu D’Anjou, Deputy Chief Economist Hélène Bégin, Senior Economist • Benoit P. Durocher, Senior Economist • Francis Généreux, Senior Economist • Joëlle Noreau, Senior Economist

Desjardins, Economic Studies: 418-835-2450 or 1 866-835-8444, ext. 5562450 • desjardins.economics@desjardins.com • desjardins.com/economics

NOTE TO READERS: The letters k, M and B are used in texts and tables to refer to thousands, millions and billions respectively.IMPORTANT: This document is based on public information and may under no circumstances be used or construed as a commitment by Desjardins Group. While the information provided has been determined on the basis of data obtained from sources that are deemed to be reliable, Desjardins Group in no way warrants that the information is accurate or complete. The document is provided solely for information purposes and does not constitute an offer or solicitation for purchase or sale. Desjardins Group takes no responsibility for the consequences of any decision whatsoever made on the basis of the data contained herein and does not hereby undertake to provide any advice, notably in the area of investment services. The data on prices or margins are provided for information purposes and may be modified at any time, based on such factors as market conditions. The past performances and projections expressed herein are no guarantee of future performance. The opinions and forecasts contained herein are, unless otherwise indicated, those of the document’s authors and do not represent the opinions of any other person or the official position of Desjardins Group. Copyright © 2019, Desjardins Group. All rights reserved.

Quebec: Retail Sales Growth Slowed in 2018 HIGHLIGHTS

f The value of retail sales dipped 0.2% in December on the heels of November’s plunge.

f However, 2018 as a whole posted a 3.3% advance, which is slower than 2017’s annual increase growth of 5.5%.

f The more subdued growth can be largely chalked up to a lull in sales of durable goods such as motor vehicles, furniture, household appliances and electronics, which are frequently purchased on credit.

f On the other hand, clothing, sporting goods and gas stations sales improved last year. Gas prices increased last year, inflating sales at the pumps.

COMMENTS

Despite a tough end to the year, 2018 showed growth overall. However, the period of lively acceleration in retail sales did not last long. The surge in employment waned last year and the economy’s steady growth gave way to a more moderate pace. Although the rise by interest rates is currently on hold due to numerous economic uncertainties, five key rate increases

ECONOMIC STUDIES | FEBRUARY 22ND, 2019

have been implemented since mid-2017. Major purchases like vehicles and furniture have already been somewhat affected.

IMPLICATIONS

Consumer spending, which has propelled Quebec’s economy in 2017, is showing clear signs of flagging, contributing to the province’s slowing economic growth. Although key interest rate increases are on hold for a while, rates are higher than they were, which is already affecting retail sales. The labour market remains tight, with an unemployment rate of less than 5.5%. This will not be enough to keep retail sales from posting even slower growth this year.

Hélène Bégin, Senior Economist

TABLERetail sales: Sharp slowdown in some purchases

Sources: Statistics Canada and Desjardins, Economic Studies

SECTORSVARIATION IN %

2017 2018

General merchandise stores 5.7 2.1

Motor vehicle and parts dealers 8.5 4.6

Furniture, electronics and appliance stores 18.2 7.5

Building materials dealers 5.8 3.3

Food and beverage stores 5.5 3.1

Gas stations 5.9 7.1

Clothing stores 0.2 3.7

Sporting goods and recreational activities stores 0.9 0.1

TOTAL 5.5 3.3

#1 BEST OVERALLFORECASTER - CANADA

GRAPHConsumer spending is flagging

Sources: Statistics Canada and Desjardins, Economic Studies

Value of retail sales

Variation in %

0

1

2

3

4

5

6

7

2010 2011 2012 2013 2014 2015 2016 2017 2018