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Economic News

Canada: Retail Sales Hit a Pre-Summer Slump

July 19, 2024
Maëlle Boulais-Préseault
Economist

Highlights

  • Canadian retail sales fell by 0.8% m/m in May, erasing April’s gain. This weak print came in below Statistics Canada’s flash estimate and the consensus of economic forecasters (both -0.6%). The table below summarizes key data points.
  • Core retail sales, which exclude sales at motor vehicle and parts dealers as well as gas stations, were down 1.4%, largely due to a drop in food and beverage sales (-1.9%).
  • An uptick in motor vehicle sales (0.8%) was offset by lower spending at gas stations (-0.6%). Lower fuel sales were entirely the result of a drop in prices, as volumes moved higher in the month.
  • Retail sales also slowed in volume terms, falling by 0.7%, the largest decrease since February of last year (graph).
  • Retail sales were down in most provinces, led by Alberta. Ontario saw its fifth consecutive monthly decline.
  • Further souring the picture for consumers is Statistics Canada’s flash estimate for June, suggesting another decline in retail sales of -0.3%. That would put quarterly nominal retail sales at -1.0% annualized in Q2—the second consecutive quarter contraction of 2024—or roughly -0.9% in real terms (assuming seasonally adjusted goods CPI for the June retail price index).

Implications

Another data release, another economic indicator justifying our call for the Bank of Canada to cut the policy rate by 25 basis points at next week’s announcement. And if the headline for retail looks bad, on a per capita basis it looks even worse due to still-surging population growth. Canadians would clearly benefit from some rate relief as they struggle with higher borrowing costs. The Bank of Canada’s most recent consumer survey showed that 66% of respondents were either cutting expenses or intending to, in response to high interest rates. Add to this the slowing inflation and rising unemployment rate External link. in June, as well as our tracking from Q2 real GDP growth in line with the Bank’s forecast of 1.5% annualized, and the rate cut case is clear.

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