Retail sales in Canada rose in July, up 0.4% month-on-month, although slight downward revisions to the June figures broke what would have been a five month streak of increased spending. July’s gains were entirely due to price increases however, as volumes declined 0.2%.
The two largest spending categories, motor vehicle and parts dealers (+0.8%) and food and beverage stores (+0.9%) saw solid increases in July. Offsetting these somewhat were declines in the furniture and home furnishings (-0.6%), electronics and appliances (-0.2%), and building material and garden equipment (-0.2%) categories. Sales elsewhere were generally up. Excluding car/parts dealers and gasoline sales, retail sales growth was a tick lower, at 0.3%.
Across the provinces, it was Quebec that drove the result, as sales rose 1.0% in July. Saskatchewan (+1.3%) and British Columbia (+0.7%) also saw decent sales growth, with the latter recording a 5th straight month of gains. Sales growth across the remaining provinces was mixed.
Key Implications
Canadians seem to have celebrated Canada Day by heading to a car dealership as new vehicle sales helped drive a respectable climb in retail sales in July. While the volume of goods sold was down a tick, the broader data evolution remains consistent with a healthy pace of GDP growth over the back half of the year.
Indeed, as discussed in our latest Quarterly Economic Forecast, consumer spending is likely to moderate from the hot pace seen at the start of the year. But, it is expected to remain an important driver of growth, supported by rising aggregate incomes generated by a healthy labour market.
With the July data likely to only partially reflect the impact of tighter monetary policy, today’s data will likely be discounted somewhat as the Bank of Canada assesses the impacts of its actions. That said, with robust July wholesale trade figures released yesterday, and a modest uptick in inflation also reported this morning, the data continues to support further monetary tightening in the final quarter of the year.
