Canada: Consumption spending on pace to contribute marginally to Q3 growth – NFB

Data released today showed that retail sales in Canada rose 0.4% in July, slightly below the +0.6% expected. According to Jocelyn Paquet, analyst at National Bank of Canada, the economic numbers suggest household consumption on goods may not contribute much to GDP growth
in July.

Key Quotes:

“The Canadian retail data for July came in weaker than expected. Although headline sales advanced for the first time in three months, most of the improvement stemmed from the motor vehicle/parts category. Without the latter, consumer outlays actually retreated slightly. Year on year, ex-auto sales slowed to just 0.5% in July, highlighting the recent malaise of Canadian consumers.”

“Real sales stalled in July while ex-auto sales retraced 0.4%. These results suggest household consumption on goods may not contribute much to GDP growth in July (due to come out on October 1st). This may also be the case in Q3 as a whole, with retail sales volumes currently on pace for just a marginal expansion in the quarter. Although this is consistent with our call for a slowdown in GDP growth from an annualized 3.7% in Q2 to about 1.5% in Q3, we still expect the quarterly outlook to improve with the release of retail data for August and September.”

“Stellar job gains in the country in the last 12 months is one reason to believe a pickup in consumer spending may be coming. The enhancement of the child benefit, which came into effect in July, may also provide some breathing space for Canadian households.”

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