Retail sales rose by 0.9% month-on-month (m/m) in July, reversing the two-month downward trend. This was higher than the Statistics Canada’s advanced estimate of a 0.6% gain.
Adjusting for the impact of inflation, the volume of retail sales was up 1.0% m/m in July.
Sales at motor vehicle and parts dealers rose by 2.2% m/m, following June’s 2.1% contraction attributed to operational difficulties due to a series of cyberattacks.
Receipts at gas stations and fuel vendors fell 0.5% m/m in nominal terms, despite higher prices at the pump (2.4% m/m growth in July).
Excluding auto sales and receipts at gas stations, core retail sales were up by 0.6% m/m in July.
E-commerce sales rose by 3.4% m/m following an upwardly revised reading in June ( +0.2% m/m from -2.4% m/m reported in the advance estimate).
Statistics Canada’s advanced estimate for August points to another month of growth of 0.5% m/m.
Key Implications
Today’s rebound in retail sales was led by stronger auto sales, which recovered from an operational setback in June. This was enough to bring three-month average auto sales growth into positive territory for the first time since January. The rest of the categories also told an encouraging story as growth in core sales accelerated on the month, likely driven by strong population. We expect the rebound in durable goods will support growth in goods spending for Q3 resulting in total personal consumption expenditures gain of 1.0% quarter-on-quarter (annualized).
A good start to the quarter is unlikely to sway the odds decisively on whether the Bank of Canada will cut rates by 50 basis points in October. Despite the good news today and another month of projected growth, the downward trend in retail spending per capita is clear. In addition to employment and inflation figures, the Bank’s communication will be critical to watch for any signs of change in the pace of easing.
