Canada: Consumption spending remained weak in Q1 - NBF

Canadian retail sales rose 0.8% in February, above expectations while on the negative side January’s numbers were revised lower. Jocelyn Paquet, analyst at National Bank of Canada, points out that real consumption retail volumes are on track during the first quarter to contract for the second consecutive quarter. 

Key Quotes:

“Headline retail sales came in better than expected in February thanks in large part to increased spending at auto dealers and gasoline stations, the latter boosted by a 1.2% rise in prices. For gasoline stations, this was the first improvement in 4 months; sales had fallen a cumulative 13.8% between October and January in this category due to a steep fall in pump prices.”

“On a less positive note, sales of electronics and appliances continued to contract and are now 3.6% below their level a year ago. The two other categories most closely associated with the housing market – furniture and building materials – were also showing year-on-year declines in sales, which suggests the current  slowdown in the housing sector is affecting consumer spending.”

“There were sharp downward revisions to January’s result (from +0.0% to -0.3%), which means that, even after February’s gains, Q1 real consumption retail volumes are on track to contract for second consecutive quarter.”

“Given the resilience of the labour market, we continue to believe things should get better in the coming months.”