Statistics Canada reports that retail sales rose by just 0.1 per cent to $65.9 billion in June. This marginal increase was driven by three sectors. Motor vehicle and parts dealers were the biggest contributors to this gain, having experienced a 2.5 per cent increase in retail sales.
New car sales rose by 2.9 per cent in June, for the third consecutive month of increases for the segment. Other motor vehicle dealers also had a substantial 5.9 per cent increase in sales, while gasoline stations and fuel vendors sales rose by 0.3% thanks to higher pump prices. This is despite sales in terms of volume having dropped by 1.4 per cent.
Core retail sales declined by 0.9 per cent in June, with the largest drop recorded by general merchandise retailers who suffered a 1.4 per cent fall in sales. Beverage retailers also experienced a 0.9 per cent decline, while overall the food and beverage sector recorded lower sales in beer, wine and liquor that fell by 2.8 per cent. Grocery retailer and supermarket sales also dipped by 0.4 per cent. E-commerce retail sales rose by 1.1 per cent to $3.7 billion based on seasonally adjusted prices.
According to Desjardins economist, Tiago Figueiredo, the data indicates weaker economic growth that is in keeping with the Bank of Canada’s expectations. With the economy performing as hoped, there is an increased likelihood that the central bank will continue to hold interest rates for the rest of the year.
Policymakers are expected to review this data for signs of excess demand in anticipation of the next interest rate decision to be announced in early September. Analysts are hoping that a further pause will be announced despite the consumer price index (CPI) rising to 3.3 per cent in July and unemployment having increased by 0.5 per cent in the same month.
With the impact of early interest rate hikes kicking in during recent months, consumers have been forced to curb their spending. However, according to the Canadian Chamber of Commerce chief economist, Stephen Tapp, the economic activity has appeared to remain sustained thanks to strong population growth driven by immigration and higher inflation. He is cautioning businesses to closely monitor their costs as sales are likely to become depressed as the economy slows down.
Some analysts, like Maria Solovieva of TD Economics, however, expect that consumer spending may experience an upsurge in July due to the government’s grocery rebates that are to be credited to an estimated 11 million people. Statistics Canada is also giving a preliminary estimate that retail sales will grow by 0.4 per cent in July.
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