Retail sales advanced a 0.6% (m/m) in April, a touch higher than March’s slightly upwardly revised 0.5% gain. The increase was entirely due to volumes, which rose 0.8% during the month.
Sales at motor vehicle and parts dealers revved higher by 3.0% during the month, making the largest contribution to the overall gain. Excluding this category, the picture was softer, as sales dipped 0.2%. In terms of other categories, notable gains were recorded in clothing and accessories (+2.5%), general merchandise stores (+1.0%) and furniture and home furnishing stores (+3.9%). On the other hand, a large drop was recorded at electronics and appliances stores (-2.4%) while lower volumes led to dropping sales at gasoline stations (-1.9%).
Sales were higher in seven of ten provinces, with gains concentrated in Quebec (1.3%) and Ontario (0.6%). There were also relatively large increases in New Brunswick (+2.5%), Manitoba (+3.2%) and B.C. (+0.6%) . Conversely, sales dropped in Nova Scotia (-2.6%), Saskatchewan (-1.8%) and PEI (-0.5%).
Key Implications
With a healthy gain in volumes, today’s report painted a relatively upbeat picture of retail activity in March. For the first quarter overall, volumes were down 1.0%, pointing to slower consumer spending. However, momentum improved as the quarter progressed which is a positive signal for near-term activity and supports our view that growth improved to an above-trend pace in the second quarter.
Healthy labour markets and solid income gains should keep consumers spending at a decent clip this year, despite the negative impacts of weaker housing market activity, rising interest rates and higher gasoline prices.
The increase in volumes in March leaves GDP growth tracking a 1.8% (annualized) first quarter increase, higher than the Bank of Canada’s first quarter estimate of 1.3%. While the tone of data has improved in recent months, we continue to expect the Bank of Canada to maintain a gradual approach to rate normalization in the face of continued domestic and external risks to the outlook, with the next hike anticipated in July.
