The Soaring Canadian Dollar and Retailer Profit Margins
On closer examination, there does seem to be statistical support for the view that the higher exchange rate is having more of an impact on retailer profits than on consumer prices.
Data from the Financial Statistics for Enterprises survey show that operating profits in the trade sector (wholesale and retail trade combined) have jumped from just over $8 Billion in ALLÂ of 2001, to over $8 Billion in EACH of the last two quarters for which we have data (fourth quarter of 2006 and first quarter of 2007.) Profits rose from $7.2 Billion to $8.4 Billion between the first quarter of 2006 and the first quarter of 2007.
http://www.statcan.ca/english/freepub/61-008-XIE/61-008-XIE2007001.htm
StatsCan calculates that, pumped up by higher profit margins, return on equity in the retail trade sector jumped to a rather stunning 18.3% in the first quarter of 2007 – beating out the average of 11.5% in non financial industries and 12.6% in finance and insurance. In fact, retail trade had the highest rate of return on equity of any major industrial sector in the first quarter, even beating out the booming oil and gas sector which posted a return of 14.1%. High profit margins reflect not just lower import prices and a generally strong retail market, but also very flat wages in the retail sector. Average weekly earnings in trade rose just $5 – from $602 to $607 – over the last year (to March) for which we have data.
My friend Duncan Cameron made a valid point in his comment on my post from yesterday – we need some form of inquiry into who is benefiting from dollar appreciation.
The retail trade data is a very robust data source, and quite timely. It would be interesting to have a look at those numbers in support of the industry numbers that you have included above. Potentially add these to this potential inquiry.