Canadian retail sales rose a better-than-expected 1.0% in June, which together with May’s solid
advance (though it was revised down a tad) put the two-month gain at a decent 2.1%. Excluding autos, which were unexpectedly higher (new car volumes were reported to have fallen), sales also climbed 1.0%. The gains were driven in no small part by a near-7% surge in gasoline prices, with gas station sales jumping 4.7%. Stripping out autos & gasoline, sales rose a more tepid 0.4%.
The impact of higher prices showed up on the volume side, with real retail sales up 0.4%. With the housing sector rebounding, furniture & electronics stores (+0.6%) were the prime beneficiaries—though building store sales fell 0.6%. Otherwise, most categories were higher: clothing & accessories (+0.1%), pharmacies (+0.8%), food and beverage (+1.3%, driven by beer and wine sales). General merchandise stores were weak (-0.6%).
The gain in real retail sales leaves them up at a 1.9% annual rate for Q2, a vast improvement from the 6.8% and 4.4% declines in Q4 and Q1 respectively. That points to a modest gain in overall consumer spending for the quarter, but won’t keep GDP from declining—we’re calling for a 3% annualized drop. The decent gain in retail sales, along with higher manufacturing and wholesale trade, should mean that June will see the first monthly increase in GDP in 11 months.
Regionally, sales were up in 9 of 10 provinces (New Brunswick saw the only decline, -0.2%).
Alberta and B.C. enjoyed good gains, but they continue to lag on a yearly basis with sales down a steep 8.8% and 8.4% respectively. Nationally, sales were down 4.4% y/y, the best reading this year and far better than a comparable 8.3% y/y decline in the U.S.
The Bottom Line: While a good chunk of the gains in June were driven by higher gasoline prices, the second straight gain in sales highlights the health of Canadian consumers relative to their U.S. counterparts. However, continued job losses into Q3 point to still-tepid household spending.
Benjamin Reitzes
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