- Maëlle Boulais-Préseault, Economist
Canada: Retail Sales Slowdown Takes Shape
- Canadian retail sales increased by 0.3% in July, slightly weaker than the consensus forecast at 0.4%. However, volumes fell by 0.2%. Core retail sales—which exclude gasoline stations and fuel vendors and motor vehicle and parts dealers—rose by 1.3%, meaning that sales at auto dealers and at gasoline stations brought down the headline. Table 1 summarizes key data points.
- Statistics Canada's flash estimate is pointing to a 0.3% decrease in August.
Weakness in auto sales in July might have been tied to the port strike in B.C. But the flash estimate for August suggests that retail sales fell sharply in volume terms, further indicating that underlying momentum in consumer spending is slowing down. While sales in August were probably somewhat restrained by wildfire disruptions in Canada, it’s unlikely to have accounted for all of the weakness. As a result, the retailing data released today reinforce the Bank of Canada’s decision to hold rates steady this month, as past rate hikes seem to be working. The July data and the flash estimate for August have pushed down our Q3 2023 real GDP growth tracking slightly, with our estimate now close to 0% (q/q annualized), which remains well below the 1.5% annualized pace forecasted by the Bank of Canada in its July MPR.
After taking into account the recent gains in population, the weakness in consumer spending becomes more visible. With more effects from higher interest rates set to come, the Bank of Canada still looks likely to hold its policy rate at 5.00% at its meeting on October 18th.
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