• Headline sales edged up 0.4%
  • Volume sales were unchanged in July, both from the prior month and a year earlier

Canadian retail sales have remained (somewhat puzzlingly) soft. The headline sales increase in July was the first in three months and, excluding price impacts, volume sales were unchanged, both from a month earlier and from year ago levels. Flat volume sales from a year ago compare with, ostensibly, strong growth in household purchasing power over the last year. Employment was up 2% from a year ago in July, wage growth was well-above the rate of inflation, and external trade risks have pushed interest rates sharply lower. All of that should be boosting household purchasing power, and consumer confidence levels remain around cycle-highs.

And, indeed, the broader household spending backdrop arguably still has looked a little better recently. Overall consumer spending growth outperformed the retail sale numbers over the first half of this year. E-commerce sales, not all of which are included in the headline retail sales number, were up 32.8% in July. And housing markets have firmed with home resales increasingly appearing to have passed their near-term bottom in the spring. We expect household spending will continue to grow at a respectable, if unspectacular, pace over the second half of this year. And that will probably be needed given still elevated uncertainties about the potential for international trade disruptions to spill over into slower Canadian manufacturing sales activity.

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