Highlights:
- Retail sales edged down 0.2% after jumping 2.2% in May.
- Sale volumes were up 3.7% (annualized rate) in Q2 as a whole after falling 4.7% in Q1.
- E-commerce sales — only some of which are captured in headline retail sales — were up 18% from a year ago.
Our Take:
The 0.2% dip in headline retail sales — a 0.3% decline excluding the impact of prices — retraced little of a big 2.2% jump in May. Sales of motor vehicles and parts edged down 0.7% on a monthly basis but sale volumes in the sector were still up almost 2% from year-ago levels that were already historically very high. Sales posted a 0.3% increase in June excluding autos and a price-led 2% drop at gasoline stations. That built on a 1.1% jump in May. Sale volumes in Q2 as a whole still bounced back 3.7% at an annualized rate after falling almost 5% in Q1. Including spending on services not captured in the retail report, underlying consumer spending growth trends still look respectable, albeit down from the unsustainably strong pace in 2017.
We expect overall GDP growth inched up 0.1% in June. That leaves overall Q2 GDP tracking around a 3% gain after a 1.3% increase in Q1. Reported shutdowns in the energy sector will likely add to headline GDP volatility in the second half of the year. Looking through quarterly wiggles, though, we are still expecting a modestly above-trend 2.0% increase in GDP in 2018 as a whole. Labour markets have continued to improve and underlying inflation trends have firmed. The economy still looks to be growing at a respectable pace while already probably running at or above capacity limits. Barring an unexpected surprise, that should warrant further gradual interest rate hikes.
