Canadian retail sales fell back 0.2% month-on-month in June. This came on the heels of a robust May report (an upwardly revised +2.2%). It was a story of lower volumes, with constant-dollar sales down 0.3%.
Autos and gasoline sales were the main contributors to the decline (-0.7% and -2.3% m/m, respectively). Excluding these categories, retail sales were up 0.3%.
Solid growth was seen at food and beverage stores (+0.9%), as well as building material/garden equipment stores (+1.1%)
E-commerce sales, reported on a year-on-year basis, continues to outperform, up 18.0%, well ahead of the 3.9% pace of retail sales overall. Online sales accounted for 2.6 cents of every retail dollar spent last month.
Breaking it down regionally, Ontario (+0.7%) eked out a gain, but this was offset by declines in Quebec (-0.7%), B.C. (-1.8%), and Alberta (-1.2%).
Key Implications
Meh. A little breather after the prior month’s robust gain was to be expected. And, with a portion of June’s pullback down to lower prices at the pump, it’s hard to get too worked up about a pause in growth. Even with the June pull back (and upward revisions to May), we’re still looking at a respectable 3.6% growth rate (annualized) in volumes for the quarter as whole – really not that bad a pace.
That said, from a longer-term perspective, retail spending continues struggling to get out of its rut – sales volumes have been basically flat since mid-2017. Rising incomes should support the sector, but rising debt service costs will remain a headwind, limiting the upside to growth.
Slotting today’s data into the bigger economic picture does little to alter the assessment of the economy’s performance in the second quarter. We expect Statistics Canada to report Q2 real GDP growth of about 3.5% q/q annualized next week. With the economy performing well and core inflation measures solidly on target, the pieces are in place for another Bank of Canada policy interest rate hike this fall.
