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Fundamental Analysis

Canada: Retail Sales Bounce Back in March

Typography

Following a slight pullback in February, Canadian retail sales bounced back, rising 0.7% in March. In real terms, volumes were up by a robust 1.2% during the month.

The gains were driven in large part by sales at motor vehicle and parts dealers (+3.2%), electronics and appliance stores (+3.1%) and general merchandise stores (+1.4%).

Providing some offset were sales at clothing and accessories stores (-2.7%), food and beverage stores (-0.7%) and at gasoline stations (-0.9%), driven largely by lower prices.

Regionally, the gains were widespread with Alberta, Quebec and Newfoundland and Labrador the only provinces to record lower retail sales during the month. Ontario (+0.9%) and B.C. (+2.3%) accounted for the bulk of the gains.

Key Implications

For the first quarter as a whole, retail sales volumes were up 1.9%, and will thus be a key contributor to overall economic growth during the quarter, which is now tracking a robust 4.0% annualized. March's strong print also provides a solid handoff for Q2.

While some cooling in the housing market may filter through to softer demand for housing-related retail items, an overall healthy domestic economy should underpin modest growth in retail volumes going forward. Indeed, we expect consumer spending to advance at a decent clip of around 2% over the remainder of the year, continuing to be a key pillar of growth in the Canadian economy.

That said, there are a number of risks that could throw the Canadian economy off course, including policy changes stateside - particularly with respect to trade - and a cooling housing market. As such, the Bank of Canada is likely to remain on the sidelines for some time still.

Author: TD Bank Financial Group Website: http://www.td.com/economics/
TD Bank Financial Group
The information contained in this report has been prepared for the information of our customers by TD Bank Financial Group. The information has been drawn from sources believed to be reliable, but the accuracy or completeness of the information is not guaranteed, nor in providing it does TD Bank Financial Group assume any responsibility or liability.
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