Retail sales start to stall as higher interest rates bite
May's figure falls short of estimates, sales were flat in June
Canadian consumers may be ready to wind down their spending, with retail sales data showing waning momentum at the end of the second quarter.
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Receipts for retailers were flat in June, according to an advance estimate from Statistics Canada released Friday. That followed a 0.2 per cent increase a month earlier, which missed the 0.5% median estimate from economists in a Bloomberg survey. In volume terms, retail sales rose 0.1 per cent in May.
May’s receipts were led by increases at motor vehicle and parts dealers as well as food and beverage retailers. Core retail sales, which exclude gas stations and car dealers, were unchanged versus expectations of a 0.2 per cent gain.
The report suggests Canadians were still spending on big-ticket items like cars, but strong momentum in April — when sales jumped by a downwardly revised one per cent — appears to be losing steam toward the end of the second quarter.
The strength in household spending earlier this year prompted the Bank of Canada to resume raising interest rates, with increases to borrowing costs in June and July after a five-month pause. With goods consumption showing some signs of a slowdown, policymakers may have some room to step to the sidelines again.
A report earlier this week showed inflation back within the central bank’s control range for the first time since March 2021, but progress in cooling underlying price pressures has essentially stalled.
Spending on some rate-sensitive products like clothing contracted in May, but receipts for sporting goods and furniture stores were still up.
Governor Tiff Macklem and his officials expect growth in consumption spending to slow over the next year as demand for rate-sensitive goods and services weakens and more households renew their mortgage at higher rates.
Regionally, sales increased in six provinces in May, led by higher sales in British Columbia and Alberta. In two biggest provinces Ontario and Quebec, sales were down for the second time in three months.
The statistics agency didn’t provide details on the June estimate, which was based on responses from 47.7 per cent of companies surveyed.
Bloomberg.com
