Canada: Weakness in Retail Sales Finally Materializes
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Maëlle Boulais-Préseault
Economist
Highlights
- Canadian retail sales decreased by 0.1% in August, slightly stronger than the consensus forecast of -0.3%. However, volumes fell by 0.7%. Core retail sales – which exclude gasoline stations and fuel vendors and motor vehicle and parts dealers – declined by 0.3%, as sales at gasoline stations brought up the headline. The table below summarizes key data points.
- Statistics Canada's flash estimate is pointing to a flat print in September.
Implications
The weakness in August came mostly from auto sales, but consumers also cut back on food and beverage purchases. On the other hand, while high prices at the pump drove up headline sales at gas stations, volumes of gasoline purchases fell by 2.9% in the month. Real retail trade has now decreased for three consecutive months. While sales in August were probably somewhat restrained by wildfire disruptions and the port strike in British Columbia in Canada, it’s unlikely to have accounted for all of the weakness. Looking ahead, the underlying momentum in consumer spending seems to keep slowing down as shown by the flat print estimated for September.
The fact that retail sales finally seem to have lost some of their recent resilience suggests we could soon see broader economic weakness. Indeed, the August retail data and the flash estimate for September have brought down our Q3 2023 real GDP growth tracking slightly to 0.2% annualized, which remains well below the 1.5% pace forecasted by the Bank of Canada in its July Monetary Policy Report. As a result, the data released today reinforce our call that the Bank of Canada’s is likely to hold rates steady next week, as past rate hikes seem to be working.