Canadian retail sales likely dropped last month, nearly wiping out all of April’s gains and highlighting weakness in consumer spending that will keep more Bank of Canada rate cuts on the table this year.
Receipts for retailers fell 0.6 per cent in May, the biggest monthly decline since January, according to an advance estimate from Statistics Canada released Friday. That followed a 0.7 per cent jump, matching expectations in a Bloomberg survey of economists.
April’s increase — the only gain in retail sales so far this year — was primarily driven by gasoline stations and fuel vendors, which likely benefited from higher prices. In volume terms, retail sales rose 0.5 per cent.
The largest decline in retail sales in April was posted by car dealers, which had been a driver of higher receipts for months. New vehicles led the drop. Excluding autos, receipts surged 1.8 per cent, three times faster than expected.
Core retail sales, which exclude gas stations and car dealers, increased 1.4 per cent on higher sales at food and beverage stores.
“Overall, the report suggests that consumer spending remain relatively weak and spending per person continues to ease,” Charles St-Arnaud, chief economist at Alberta Central, said in an email.
The report is not expected to have a big impact on the Bank of Canada, which remains focused on inflation, he said. Tuesday’s release of the consumer price index for May will be an important determinant as to whether it follows its June rate cut with another trim in July, he said.
“In my view, a cut in July followed by a lengthy pause to evaluate the impact of lower rates would be the right course of action.”
Andrew Grantham, an economist at the Canadian Imperial Bank of Commerce, said the annual increase in retail sales remains well below the pace of population growth.
“Today’s data therefore suggest that many Canadian households continue to restrict their spending in the face of high interest rates, and rates will need to come down further to provide meaningful relief,” he said in a report to investors.
“We continue to expect three more 25 basis-point reductions to the Bank of Canada’s overnight rate before the end of the year, including a move at the next meeting in July.”
Regionally, sales rose in eight of 10 provinces, with Alberta seeing the largest provincial increase of 3.1 per cent, driven by higher receipts at vehicle and parts dealers.
Ontario, on the other hand, recorded the biggest provincial decline of one per cent, led by lower sales at car dealers. Sales were down 2.5 per cent in Toronto.
The statistics agency didn’t provide details on the advance estimate for May, which was based on responses from 47.5 per cent of companies surveyed. The average final response rate for the survey over the previous 12 months was 90.3 per cent.
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2024-06-21 13:21:05Z
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