- Retail sales advanced 0.8% (m/m) in February, topping consensus expectations for a 0.4% uptick. This came on the heels of a disappointing January report, which saw sales drop a revised -0.4% (previously reported as -0.3%).
- The picture was slightly less impressive after accounting for price changes, with volumes up a modest 0.2%, not enough to offset January’s revised decline (-0.3%, initially reported as 0.0%).
- Sectoral performance was mixed, with 5 of the 11 subsectors recording an increase. The uptick was mostly driven by an increase in sales at general merchandise stores (+3.8%) and motor vehicles and parts dealers (+1.4%). Sales at gasoline stations also rose 1.9%, which was to be expected given increases in gasoline prices.
- Providing some offset were lower sales at building material and garden equipment stores (-1.6%) and electronics and appliance stores (-3.5%).
- Regionally, seven provinces saw retail sales increase. Ontario (+1.5%) and Quebec (+1.6%) accounted for a large chunk of the headline increase. Alberta (+0.9%), Saskatchewan (+1.3%), and Manitoba (+2.2%) also saw retail sales advance. Performance across the Atlantic provinces was mixed. British Columbia provided the most notable offset, with sales falling 1.9% on the month.
Key Implications
- Despite the above-consensus release, we shouldn’t get carried away with the positive print. The relatively modest volumes uptick does little to change our GDP tracking for Q1. Retail activity for Q1 as a whole is likely to disappoint, and a large spending uptick would be needed in March to bring retail sales volumes for the overall quarter into positive territory. Looking ahead, the retail activity picture in Canada is likely to echo our expectations of subdued consumer spending, as past increases in borrowing costs continue to work their way into the system and partially offset gains from strong labour markets.
- Today’s report joins a range of other indicators this week (manufacturing sales, international trade, Bank of Canada’s Business Outlook Survey) reaffirming our view that the Canadian economy likely went through a soft spot in Q1.
