Canada: Nominal retail sales inch lower – RBC Economics

Nathan Janzen, Senior Economist at RBC Economics, notes that the Canada’s nominal retail sales inched down 0.1% in July, below market expectations for a 0.1% increase which largely reflected a 3.0% pull-back in gasoline station sales reflecting lower prices.

Key Quotes

“Excluding gasoline stations, sales inched up 0.2%. Motor vehicle sales declined 0.2%, in line with earlier reported unit auto sales numbers, but were still up 4.2% from a year ago. Sales of furniture also de-clined (-1.4%) with the main sources of offset a 1.5% increase in building equipment sales (the first in-crease in three months) and a 1.6% jump in clothing store sales.

Regionally, overall nominal sales declined in 6 provinces, led by a 6.9% pull-back in New Brunswick with the main sources of partial offset coming from a 0.8% increase in Ontario and 0.9% gain in B.C.

Our Take:

The monthly retail sales numbers, as with most Canadian data releases, are volatile and the gain in sale volumes in July marks just the first rise in 5 months. Nonetheless, the measure was still up 2.0% from a year ago and has risen 2.8% year-to-date compared to a 1.2% increase in all of 2015.

Although there has been some cooling in housing markets (particularly in B.C.) recently, the underlying backdrop for household spending (resilient labour markets, low interest rates, and increased federal government transfers) remains positive and we expect consumer spending to remain a key support to GDP growth this year and next. In terms of near-term GDP implications, manufacturing sale volumes also rose in July, non-energy export volumes rebounded sharply, and oil production continued to recover from temporary wildfire related disruptions in May.

We expect a 0.5% increase in July GDP that would build on the 0.6% jump in June and leave the data tracking a 3.7% gain in Q3 as a whole following the 1.6% decline in Q2.”