Data released in Canada on Friday showed retail sales rose 2.2% in May surpassing expectations of a 1.6% gain. Analysts at the National Bank of Canada point out sales were pushed up at gasoline stations and motor vehicle/parts dealers. They consider a strong labor market will compensate higher prices and rising interest rates.
Key Quotes:
“Consumer expenditures on goods came out better than expected although the prior month observed a small downward revision. The May print was pushed up by sales at gasoline stations and motor vehicle/parts dealers.”
“The remainder of the retail sales report was not too shabby as witnessed by core retail sales (ex. autos/gas) which increased 0.6% in May, a fifth consecutive monthly increase. The national diffusion of retail sales was also a bright spot of the report as all provinces reported gains in the month.”
“There was some optimism to be found by the increase in volume retail sales which rose 0.4% in the month. Including the rise in the previous month, real retail spending increased 2.1% annualized in the second quarter of the year assuming growth is flat in June. The Statistics Canada preliminary estimate for June suggests a 0.3% increase in nominal sales.”
“While gas receipts should support nominal retail sales with rising gasoline prices in June, there could be a reduction in spending in other sectors as consumers deal with higher prices and rising interest rates. Hopefully these headwinds are compensated by a strong labour market and a still high savings rate.”
