Figures released this morning by Statistics Canada provided more for the worrywarts to consider on Canada's economic recovery.
Nominal retail sales in June fell 0.6% in the month which was slightly greater than the 0.4% drop expected going into the report. However, the decline only partially reversed the 1.8% surge reported in May that was revised marginally lower from the 1.9% increase previously reported.
Expectations of a decline in June on the part of the nation's number-crunchers were partly based on expectations that the flooding in Alberta and the construction strike in Quebec may have weighed on activity. Statistics Canada confirmed these developments did likely exert downward pressure on activity contributing to retail sales in Alberta dropping 0.6% and in Quebec falling 1.3%.
However a 1.4% drop in Ontario retail sales implied the weakness was not solely due to these factors though sales in that province had soared 2.0% in May with the June data providing only a partial retracement.
Sales at motor vehicle dealerships were relatively flat in the month rising only 0.2%.
According to experts at RBC Economics, "we had been expecting some retracement from the oversized 4.0% jump in May. In contrast, gasoline sales were weaker than expected rising only 0.2% with limited lift to nominal receipts from rising gasoline prices in the month. Excluding these two volatile components, sales fell a sizable 1.0%. This in part reflected the impact of the flood and strike though there may also have been some payback from the 1.1% surge in May.
"The sales declines in June were relatively broadly-based, led by food and beverage stores (1.2%), building material stores (1.9%) and
clothing stores (1.8%)."
The bank concludes, "the extent of the impact of the flooding is a wildcard as there is only limited advance information as to the magnitude of its impact. Our assumptions are based on some partial information on energy drilling activity and the view that the overall impact of the event on the economy will be less severe than what occurred during the January 1998 ice storm that hit Quebec and Eastern Ontario.
"The Bank of Canada is implicitly assuming a much larger hit from the flood and the strike given its Q2 GDP growth forecast of only 1.0%. However, a more severe drop in Q2 implies a sharper bounceback in Q3 with the central bank projecting a 3.8% increase."
