Retail sales declined 1.2% (m/m) in April, coming in considerably weaker than the consensus forecast for a flat reading. The decline was even stronger in real terms, with volumes falling by 1.4% during the month.
The disappointing headline was largely due to weaker sales at motor vehicles and parts dealers, which declined by 4.3% following two months of strong sales. Excluding this category, the picture was somewhat better, with sales remaining flat on the month. The market was expecting ex-auto sales to rise by 0.7%.
Only a handful of categories posted an increase in April. Sales rose at food and beverage stores (+2.3%), electronics and appliance stores (+1.6%) and gasoline stations (+1.4%). Meanwhile, sales of clothing & accessories declined 1.3% on the month and a slowing housing market weighed on sales of building materials & garden equipment (-3.3%) as well as furniture & home furnishings (-1.5%).
Regionally, retail activity slowed in six of ten provinces. The largest declines were seen in Quebec (-2.7%), New Brunswick (-2.5%) and Ontario (-2.3%). Activity picked up in Saskatchewan, Alberta, British Columbia and Nova Scotia.
Key Implications
Today’s retail sales report is nothing to write home about. The slowdown in auto sales was largely expected, but the ex-auto print still came in considerably weaker with few categories to fill in the dent left by retreating auto sales.
While the retail spending this year has been on a softer side, it is important to keep in mind that it is slowing from an usually strong pace seen last year. We have long said that the repeat performance is unlikely, and thus some of the moderation in retail activity this year reflects a return to more normal patterns of economic growth. A housing market slowdown and a more moderate pace of job creation are also keeping tabs on retail sales this year.
Even after today’s decline, GDP growth in the second quarter is tracking 2.4% (annualized), with growth for the year as a whole expected to average 2%, in line with our recently published forecast.
