Following a sharp 2.3% jump in January, Canadian retail sales took a breather in February, sliding 0.6%. In real terms, sales held up a little better, falling by a more modest 0.1%.
The drop was driven largely by weaker sales at gas stations (-3.6%) thanks to lower gas prices, and 1.8% decline in sales at motor vehicles and parts dealers – the first drop in seven months. On the flipside, sales at health and personal care stores, clothing and accessories stores and sporting goods stores were all up by around 2% during the month.
Regionally, the drop was widespread with only Saskatchewan (+0.6%) and New Brunswick (+0.3%) recording gains.
Key Implications
Despite the pullback in February, the massive jump recorded in January leaves retail sales well above the levels seen in the fourth quarter of 2016. As such, it is expected to be supportive of consumer spending and overall economic growth during the first quarter of this year, with the latter currently tracking 3.4% q/q, annualized.
February’s setback was driven largely by weaker gasoline prices, with a number of industries posting gains during the month. Retail sales volumes are expected to remain relatively strong going forward, with overall consumer spending expected to grow by a healthy 2% pace over the remainder of this year.
As such, today’s report is unlikely to alter the Bank of Canada’s view on monetary policy, with the overnight rate expected to remain as is for some time still.
