Canada: Softer Retail Sales May Be Just the Beginning
- Canadian retail sales rose by 0.2% m/m in May, with a modest 0.1% m/m climb in volumes. Sales at auto dealers and gas stations propped up the headline, with core retail sales—which exclude gasoline stations and fuel vendors and motor vehicle and parts dealers—unchanged in the month. Table 1 summarizes key data points.
- Statistics Canada’s flash estimate for June points to no change from May (graph 1). That brings second quarter tracking to 0.5% (q/q annualized). If retail prices advance in line with the 0.5% seasonally adjusted goods price inflation gain in June, it would mean a mild drop in real retail sales in Q2 2023.
Retail sales momentum is clearly slowing. Purchases came in below consensus estimates, and we’ve now seen weak growth or outright declines in three of the past four months, with signs of more softness in June. Another 25 bp interest rate hike earlier this month from the Bank of Canada should weigh on the consumer in July and beyond.
May data and downward revisions to April figures incrementally lowered our Q2 2023 real GDP growth tracking, but we’re still in the 1.5–2% (q/q annualized) range. That is slightly higher than the Bank of Canada’s July forecast but is not enough to change our view that the Bank will hold rates steady in September.
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