Retail sales declined 0.1% month-on-month (m/m) in August, coming in better than Statistics Canada’s advance estimate for a 0.3% m/m decline, but in line with expectations. July’s print was revised up to 0.4% m/m from 0.3% m/m reported in the advance estimate.
Adjusting for inflation, the volume of retail sales was 0.6% lower on the month.
Sales at motor vehicle and parts dealers fell by 0.9% m/m – the second consecutive month of declines. Ex-auto, sales were up 0.1% m/m, above the consensus expectations for a decline of the same magnitude.
Sales growth at gasoline stations and fuel vendors were up 2.8% as gas prices accelerated thanks to a recent spike in oil prices. In volume terms, receipts were down 2.9% m/m in August.
Excluding sales at car dealerships and gas stations, core retail sales were down 0.3% in August. The 1.2% m/m decline in sales at food and beverage stores was the major driver of this loss, but most other categories were also in the red in August.
Only three other major categories reported gains in August: health and personal care stores (+1.2% m/m), electronics and appliance stores (+0.3% m/m), general merchandise stores (+0.3% m/m).
E-commerce sales also dwindled, losing 2.0% m/m in August following three consecutive months of strong gains.
According to Statistics Canada, approximately 12% of Canadian retailers reported that their business activities in August had been affected by the strike at the ports in British Columbia..
Based on the answer of 36.5% of companies surveyed, advanced estimate for the month of September points to a flat reading. This is better than are own estimate of consumer activity based on TD debit/credit card spending, which points to a decline in September.
Key Implications
Retail sales were weak in August, but with July’s upward revisions this wasn’t enough to put the third quarter’s already modest consumer spending profile at risk. We expect personal consumption expenditure to be fairly anemic in the third quarter, advancing at only a 1-1.5% pace, in line with our internal spend data.
The balance of risks for the Canadian economy is slowly swinging to the downside as consumer confidence continues to be soured by the Bank of Canada’s rate hikes and elevated inflation. This certainly allows the Bank to remain on the sidelines at next week’s decision. We expect that moderating demand tempers inflation going forward, while keeping spending just slightly below sub-trend without sending disruptive ripples through the economy.
