Data released on Friday showed a 2.5% decline in Canadian retail sales in July, a larger-than-expected slide. Analysts at CIBC, still see the Bank of Canada (BoC) raising the key interest rate by 50 basis points in October.
Key Quotes:
“After months of gains, Canadian retail sales fell more than expected in July as Canadians may have started to react to higher interest rates. Headline sales fell 2.5% in July, below consensus expectations for a 2% decline. In volume terms, retail sales pulled back 2%.”
“Retail sales had been more resilient than expected in the past couple of months given high inflation, rising interest rates and a shift to service consumption. The weaker-than-expected July data finally provides some evidence that the expected shift away from goods consumption and the impact of higher rates are starting to materialize more meaningfully. This is the type of data the Bank of Canada will be looking for as it enters what should be the last stage of its hiking cycle.”
“We continue to expect another 50 bps increase in October, before further evidence of a cooling economy allows the Bank to pause its rate increases.”
