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A note taped to the front door of a closed shop in Toronto is seen in an April 28 2020, file photo.

Fred Lum/the Globe and Mail

Retail sales in Canada plunged by 26.4 per cent in April with strict lockdowns in place, although that’s likely to be the low point for purchases now that reopening is under way.

Between February and April, consumer spending plummeted by 33.6 per cent, or nearly $18-billion, Statistics Canada said Friday.

The statistical agency noted that roughly one-third of retailers closed in April, with an average shutdown length of eight business days, based on company feedback.

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Sales were down in all sub-sectors in April, with especially large drops at motor vehicle and parts dealers (44.3 per cent), food and beverage stores (12.7 per cent), and gas stations (32.2 per cent), which was partially a reflection of weak oil prices.

The retail pullback was worse than expected. A month ago, Statscan estimated sales would drop 15.6 per cent in April, or roughly 11 percentage points better than Friday’s result.

“The Canadian economy, and retail trade specifically, looks to have been hit even harder than initially estimated,” said Bank of Montreal chief economist Douglas Porter in a client note. “April is most obviously cementing its reputation as the worst month for the Canadian economy ever.”

But with provinces reopening, May is poised for a rebound. Statscan estimates retail sales jumped higher by 19.1 per cent last month, cautioning the figure will likely change.

For weeks now, high-frequency data have shown that economic activity is reviving as restrictions ease. Canadians are getting out of their houses more, by foot and car, and for recreational and retail purposes, according to mobility data from Apple Inc. and Google Inc.

People are more comfortable opening their wallets, as well. A Scotiabank report published Thursday shows consumer spending has improved substantially into June, across all provinces. Similar reports from Royal Bank of Canada and Toronto-Dominion Bank also show rebounds.

Even the hard-hit restaurant industry is faring better. Reservations through OpenTable are still down substantially from a year ago, but are strengthening in Calgary, Edmonton and Vancouver.

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This week marked a milestone as a slim majority (51 per cent) of small businesses said they were now fully open, a drastic improvement since the height of lockdown measures in April, according to survey results from the Canadian Federation of Independent Business (CFIB).

In the summer months, the eight-week extension of the Canada Emergency Response Benefit – which pays out $2,000 every four weeks to workers significantly affected by COVID-19 – should keep a floor under demand.

“[CERB] has paid out far more than we expected, and household income was probably broadly unchanged in the second quarter,” Stephen Brown, senior Canada economist at Capital Economics, said in a recent report. “Together with the confirmation [Tuesday] that the program will be extended by two months, this raises the chance of a stronger recovery than we forecast.”

There are encouraging signs out of the U.S., as well. Earlier this week, the U.S. Commerce Department said retail sales surged by roughly 18 per cent in May from April.

A Canadian rebound in May would unwind only some of the damage. If Statscan’s preliminary estimate is correct, total retail sales in May would still be roughly 20 per cent lower than a year earlier.

“It’s a long road back from these April lows,” Mr. Porter said.

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As such, the coming months will not be without hardship for retailers. Among companies that are fully open, only 30 per cent have seen sales return to normal, CFIB said Wednesday. Economists have warned of a second wave of business closures as companies reopen to strict health restrictions, weaker sales and larger debt obligations that make operations untenable.

Beyond a short-term snapback in economic activity, the road to recovery could be bumpy, Bank of Canada deputy governor Lawrence Schembri said Thursday in a speech.

“The second phase, the recuperation, is highly uncertain, and thus will be more prolonged and uneven,” he said. “The willingness of households to spend will depend on many factors, including the recovery in employment, income and confidence, and the possibility of future outbreaks.”

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