Canada: Signs that higher interest rates are having an impact on consumer spending – CIBC
|Data released on Friday showed retail sales in Canada dropped 0.2% in February, a better-than-expected number but excluding auto fell 0.7%, more than forecast. Analysts at CIBC consider that the sluggishness in ex-auto spending is a sign that higher interest rates are having an impact. They see the Bank of Canada on hold for the rest of the year.
Key quotes:
“The start of the year surge in retail spending appears to be gradually fading, with a modest 0.2% decline in February (consensus -0.7%) estimated to be followed by a sharper 1.4% drop in March.”
“While the advance estimate for March suggests a steep 1.4% drop, that was derived from responses covering only 28% of companies normally surveyed, and as such could be heavily revised.”
“Even though the economy as a whole has performed better than expected recently, the sluggishness in ex-auto retail spending volumes is a sign that higher interest rates are indeed having an impact on consumer spending decisions, despite the excess levels of savings held by households. This sluggishness in spending should help keep goods price inflation under control (assuming supply chain issues don’t worsen again), allowing the Bank of Canada to stay on hold for the remainder of this year before gradual cuts start early in 2024.”
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.