Canada: Expect 1.0% increase in total retail sales for September - TDS

Analysts at TDS, suggest that a rebound in core retail activity and surge in gasoline prices should help drive a 1.0% increase in Canada’s total retail sales for September.

Key Quotes

“Core retail sales (ex. auto and gasoline) saw one of their largest declines of the post-crisis period in August and such outsized moves tend to correct the following month. Gasoline station receipts will add another source of upside with prices nearly 5% higher at the pump due to hurricane effects. Auto sales are likely to see a modest pickup, outpaced by a sizeable increase in sales beyond the dealer's lot. This would leave ex-auto sales up 1.1% for their strongest gain since April.”

“Real retail sales should underperform the nominal increase and after negative prints in July and August, are likely to come in only slightly higher for Q3 as a whole. This is consistent with a deceleration in real household spending from the current post-crisis high of 3.9% y/y in Q2.”

“Foreign Exchange

• The market is likely to reshuffle its attention back to Canadian data following some headline watching related to NAFTA. USDCAD is coming into to the release with little bias on our valuation metrics. Notably, market positioning looks clean and the pair is trading close to our HFFV estimates, leaving the pair to trade on the pulse of the data. Canadian data has decelerated over the past three months, which has dovetailed with BoC and CAD repricing. Even so, despite the deceleration in data surprises, the market continues to upgrade its views on Canadian growth.
• The past six months have seen the market upgrade its growth views about 80bp, which is one of the highest in the G10. Given this backdrop, our upbeat view on retail sales should offer some modest tailwinds to CAD over the coming days. An eventual downside break of the 25dma and trend line support drawn off the Sep lows would favor an immediate push towards 1.2586.”