Senior Director of Canadian Economics
Canada: Weaker Auto Sales Drive Growth Lower in March
- Retail sales fell 1.4% in March, in line with Statistics Canada’s flash estimate and the consensus of forecasters. The decline in the month was largely driven by a 1.0% decline in retail sales volumes.
- Sales were lower in 5 of 9 subsectors, with sales at motor vehicle and parts dealers (-4.4%) and gasoline stations and fuel vendors (-3.9%) leading the charge lower.
- At the same time, core retail sales – purchases excluding gasoline stations and fuel vendors and motor vehicle and parts dealers – edged up 0.3% in the third month of 2023. This was the fourth consecutive monthly increase. Sales at building material and garden equipment and supplies dealers (1.6%) posted its third consecutive monthly advance, mirroring the improvement in the housing market.
- For the first quarter of 2023, retail sales advanced by 3.0% annualized, driven entirely by a 4.9% increase in retail sales volumes on the back of surging auto sales. In contrast, prices fell by 1.8%, broadly in line with a similar move lower in the goods Consumer Price Index.
- Statistics Canada’s advance estimate of retail sales is pointing to an increase of 0.2% in April 2023. Just over 38% of companies have responded to the April survey so far, versus the nearly 90% typical response rate at time of publication.
This widely-anticipated decline in retail sales activity in March doesn’t move the needle much on our view for the economy or monetary policy. We continue to expect real GDP growth in Q1 2023 will come in around 3% annualized, outpacing the 2.3% published in the Bank of Canada’s April Monetary Policy Report. However, Governor Tiff Macklem’s dovish overtones at yesterday’s press conference suggests the Bank isn’t fully sold on the idea that further rate hikes are needed just yet.
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