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Economic News

Canada: April Retail Showers Don’t Bring May Retail Flowers

June 21, 2024
Florence Jean-Jacobs
Principal Economist

Highlights

  • Canadian retail sales grew by 0.7% m/m in April, ending a streak of three consecutive monthly declines. This is in line with Statistics Canada’s earlier flash estimate and the consensus of economic forecasters. The table below summarizes key data points.
  • Core retail sales, which exclude motor vehicle and parts as well as gasoline retailers, were particularly robust, up 1.4%, on the strength of food and beverage sales (+1.9%).
  • Weak motor vehicle sales (-2.2%) were offset by higher spending at gas stations (+4.5%). Both gas prices and volumes increased.
  • In volumes terms, retail sales picked up, rising by 0.5%, the largest increase since December of last year (graph 1).
  • Retail sales were up in most provinces, led by Alberta. However, Ontario saw its fourth consecutive monthly decline and the largest drop since May 2023.
  • Putting a damper on these results: April’s gains could be mostly erased in May, since Statistics Canada’s flash estimate for May nominal retail sales points to a 0.6% monthly decline.  

Implications

The return to positive retail sales growth is a welcome evolution after a downbeat first quarter. The rebound in core is particularly encouraging, with sales picking up in grocery stores as well as in more discretionary spending categories like clothing, sporting goods, and miscellaneous retailers.

The Canadian economy is turning the corner from its lacklustre performance at the end of last year. After today’s release, we are tracking real GDP growth of about 1.75% in Q2, similar to the first quarter and slightly above the Bank of Canada’s projection of 1.5% (see our latest Economic and Financial Outlook External link.). Further cuts to the policy rate should bring relief to households and help stimulate retail sales in the coming months—albeit with headwinds from shelter costs moderating demand.

There may still be bumps in the road, as May’s negative flash estimate suggests. Moreover, with population continuing to grow at record speed, real retail sales per capita are still softening (graph 2). A planned reduction on admissions of non-permanent residents could push per capita consumption higher in the coming quarters and years, particularly when combined with lower borrowing costs.

Overall, unless there is a major surprise in May’s CPI next week, we still expect the Bank of Canada to proceed with a second cut to the overnight rate in July.

 

NOTE TO READERS: The letters k, M and B are used in texts, graphs and tables to refer to thousands, millions and billions respectively. IMPORTANT: This document is based on public information and may under no circumstances be used or construed as a commitment by Desjardins Group. While the information provided has been determined on the basis of data obtained from sources that are deemed to be reliable, Desjardins Group in no way warrants that the information is accurate or complete. The document is provided solely for information purposes and does not constitute an offer or solicitation for purchase or sale. Desjardins Group takes no responsibility for the consequences of any decision whatsoever made on the basis of the data contained herein and does not hereby undertake to provide any advice, notably in the area of investment services. Data on prices and margins is provided for information purposes and may be modified at any time based on such factors as market conditions. The past performances and projections expressed herein are no guarantee of future performance. Unless otherwise indicated, the opinions and forecasts contained herein are those of the document’s authors and do not represent the opinions of any other person or the official position of Desjardins Group.