- Canadian retail sales fell 0.1% (m/m) in August, following an upwardly revised 0.6% increase in July (previously reported as +0.4%). The release came below consensus expectations for a 0.4% increase.
- After stripping out price effects, the picture was slightly better, with volumes up a modest 0.2%.
- Sales were down in 6 of the 11 major categories. The headline decline was mostly driven by lower sales at food and beverage stores (-0.8%) and gasoline stations (-0.4%). Sales at general merchandise stores (+0.8%), and motor vehicle and parts dealers (+0.1%) provided some offset.
- The soft performance was regionally concentrated. Only 4 of the 10 provinces saw retail sales decline in August. Lower sales in Ontario (-0.8%) and Manitoba (-1.6%) contributed the most to the decline. Providing some offset were stronger performances in British Columbia (+0.8%) and New Brunswick (+3.8%).
- August’s retail trade release doesn’t change the underlying trend of subdued retail sales and volumes growth. The so-so volumes gain and positive July revisions do however, generate some upside risk to our Q3 GDP tracking of 1.4% (annualized).
- We have noted previously that a divergence remains between household spending on one hand, and healthy labour markets and wages on the other. Continued strength in labour and housing market momentum (as seen in recent data) should provide some modest support to the sector, but household debt levels and high debt-service costs will continue to act as a damper against any acceleration in consumer spending. The result: expect more ho-hum reports to come.