EconoFACTS

September 22, 2023 | 08:59

Canadian Retail Sales (July) — Hey Careful Spender

Economist

Robert Kavcic

Senior Economist and Director
Economics

Robert has been with BMO Capital Markets since 2006. He plays a key role... (Read more)

Robert Kavcic

Senior Economist and Director
Economics

Robert has been with BMO Capital Markets since 2006. He plays a key role... (Read more)

Canadian retail sales rose 0.3% in July, a tick below expectations, following a 0.1% (unrevised) gain in the prior month. Auto sales fell 1.6% in the month, while gas station receipts were down 0.7%. That leaves core sales (excluding autos and gas) up a much firmer 1.3%. Gains were recorded pretty broadly across building materials, food & beverage, furniture, general merchandise and health care. While that looks pretty solid, StatCan’s early read estimates that sales turned down 0.3% in August.

Inflation and population growth are still propping up the retail spending numbers. For example, while headline sales are up 2.0% y/y, per-capita sales volumes are down 0.6%. In July specifically, retail volumes were down 0.2% and, looking ahead to August, strong inflation in goods prices suggests that sales volumes had another even tougher month. With the July real GDP report on deck next week, the decline in volumes supports the case that growth will be about flat in the month. More broadly, high food and gas prices, along with the steady flow of upward mortgage renewals, figures to remain a headwind on discretionary consumer spending in Canada.

At the provincial level, retail sales were very mixed in July with an even split of gains and declines. From a year ago, Quebec leads the pack at 4.3% y/y, while parts of Atlantic Canada are also outperforming the national average.

The Bottom Line: Discretionary consumer spending is getting held back by inflation and surging borrowing costs. Another sign of sluggish growth for the Canadian economy while the Bank of Canada, at the same time, grapples with above-target inflation.

Table 1 - Canada — Retail Sales

(month/month % change : s.a.)

Source: BMO Economics, Haver Analytics