EconoFACTS

August 20, 2021 | 08:59

Canadian Retail Sales (June) — Starting Summer Strong

Economist

Director, Canadian Rates & Macro Strategist
Fixed Income Strategy

Benjamin has been with the Bank of Montreal for over a decade. He is responsible for the Canadian macro-economic... (Read more)

Benjamin Reitzes

Director, Canadian Rates & Macro Strategist
Fixed Income Strategy

Benjamin has been with the Bank of Montreal for over a decade. He is responsible for the Canadian macro-economic... (Read more)

Canadian retail sales rose 4.2% in June, a strong start to the summer, even if it was a couple of ticks below the flash estimate. However, May was revised up a couple of ticks to -1.9%, providing an offset. The gains were broad-based, with massive increases in clothing (+49.1%), sporting goods (+27.9%) and furniture/home furnishings (+23.2%). Clearly it helps when one can try clothes on before buying, while the better weather was likely supportive as well. Autos were up a more modest 2.7%, leaving sales excluding autos at +4.7%. In a partial reverse of the prior month, the only sectors reporting losses were building materials, food/beverages & electronics.

Statcan's early estimate for July retail sales is for a 1.7% drop, which is a bit disappointing as reopenings continued. However, the June increase pushed sales above the "normal" trend, and it's very possible that spending was redirected to services as that sector more fully reopened. Regionally, 6 of 10 provinces reported gains, with Ontario (+9.8%) and Nova Scotia (+16.3%) seeing huge reopening boosts as they were the most restrictive in prior month. Other provinces saw more subdued moves.

Retail volumes rose 4.1% in June, as prices were modestly higher in the month. With manufacturing and wholesale figures already in hand, it looks as though June GDP will come in close to Statscan's +0.7% estimate. That puts Q2 GDP growth on track to be in the 2%-to-2.5% a.r. range, consistent with the BoC's July MPR forecast.

Key Takeaway: As stores reopened, shoppers spent more freely, which should come as a surprise to no one. The flash estimate of a decline in July is a bit disappointing, but look for strength in services to provide an offset. Unfortunately, with case counts rising in recent weeks, the outlook for retail is getting cloudier.

Table 1 - Canada — Retail Sales

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

Source: BMO Economics, Haver Analytics