Find out if the country is recovering
Statistic Canada released a report on Friday highlighting a 0.3% increase in retail sales in July, amounting to $66.1 billion.
Katherine Judge, a senior economist from the Canadian Imperial Bank of Commerce (CIBC), said that the increased number of sales in grocery stores could be a sign that households are opting to dine less because of rising interest rates and prices.
“That casts doubt on the notion of services consumption providing an offset to weak goods consumption at the start of the third quarter,” said Judge.
Statistics Canada also reported that the early estimate for August suggested that there was a drop in retail sales by 0.3%. While the agency also clarified that the estimate can still be revised, Judge believes that the advanced reading for August may have been impacted by wildfires.
“But even when allowing for a rebound in September, real retail sales look to be down 2.5-3.5% annualized in the third quarter, the second consecutive quarter of weakness that suggests consumer spending will be soft in the GDP numbers for the third quarter,” explained Judge.
Retail sales in July
In July, seven out of the nine subsectors saw an increase in nominal sales. Food and beverage retailer sales increased by 1.3%. This was further lifted by a 1.5% increase at supermarkets and other grocery retailers which did not include convenience stores and a 1.3% increase at beer, wine, and liquor retailers. General merchandise retailer sales increased by 1.8%.
While automotive parts, accessories, and tire retailer sales increased by 1%, the largest decrease in sales was felt by motor vehicle and parts dealers. They saw a decrease of 1.6%, which was the first decline in four months. New car dealer sales dropped by 1.7%, while sales for used cars decreased by 3.1%. Judge explained that this was because of a string of strong gains that auto dealers had experienced. Since the supply chains had normalized, the industry was now catching up to demand.
Gasoline stations and fuel vendors sales decreased by 0.7%. In terms of volume, they fell by 1%.
Judge asserted that the performance of retail sales showed consumer strength continued to weaken in the third quarter.
“We expect the unemployment rate to rise further ahead, and combined with the impact of mortgage renewals at higher interest rates, that will add pressure to consumption, likely leaving the Bank of Canada on hold for the rest of this year,” said Judge.
