Canada: Retail sales data point to sluggishness in consumer spending – CIBC

Retail Sales rose in Canada by 0.2% in May, below the 0.5% increase expected. Analysts at CIBC point out that retail sales seeing little growth in May, and the advance estimate suggests that the sideways trend continued into June, the report reflects sluggishness in Canadian consumer spending even before the Bank of Canada restarted its rate hiking cycle.

Key quotes: 

“Canadian retail sales rose by a modest 0.2% in May, slightly below the 0.5% consensus forecast albeit following a strong 1.0% increase in the prior month. In volume terms, overall sales edged up by 0.1% on the month and were 1.3% higher on a year-over-year basis. Given strong population growth seen over the past 12 months, this year-over-year growth rate would still represent a decline in per capita terms.”

“While overall GDP in Q2 is still tracking close to the 1.5% Bank of Canada MPR forecast, today's data suggest that consumer spending likely wasn't a significant driver of that growth, even accounting for growth in services spending. Industry data showing strength in areas such as manufacturing and wholesale suggest that inventory accumulation or business investment may be more significant contributors, which wouldn’t be bad news from an inflation point of view.”