• Headline sales jumped 1.1% to build on a 1.0% increase in February, although the March gain was boosted by a price-led 6% increase in sales at gasoline stations
  • Controlling for price-effects, sale volumes edged up 0.3% after a 0.4% increase in February but were still down slightly on average from Q1

Even with an increase in March, retail sale volumes were down slightly in Q1 as a whole – consistent with prior expectations for another soft quarter for consumer spending growth. Job growth has been almost unbelievably strong, supporting overall household income growth despite wage gains that are still lackluster for this point in the economic cycle. But debt payments are still eating up a larger share of incomes than before. Bucking a flattish trend for sales overall, sale volumes at both furniture and building material sales bounced back solidly in the first quarter after declining over the second half of last year. That probably is related to some of the more recent stabilization in home resales. Nonetheless, housing markets are still softer than in earlier years, and that means earlier boosts to broader purchasing power from increases in real-estate equity are not being repeated.

Household expenditure growth is clearly providing less support to economic growth than in recent years, but the broader backdrop has still looked okay – at least once looking through the likely transitory impact of Alberta’s oil production cuts and bad weather over the winter. The intensification of the U.S.-China trade dispute has raised some grey clouds for the U.S. industrial sector and, by extension, Canada’s. But the removal of U.S. steel and aluminum tariffs on Canada, along with Canada’s retaliatory measures, will provide some offset. And the tick up in retail sale volumes in March follows earlier-reported bounce-backs in manufacturing sales and exports after likely weather-related drops in February. The data on balance is still consistent with GDP growth coming in at a sub-1% rate in Q1 but better reports later in the quarter also still leave the odds on a bounce-back to a 2% rate in Q2.

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