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.
