Retail sales increased 0.3% to $66.1 billion in July. Sales increased in seven of the nine subsectors and were led by increases at food and beverage retailers (+1.3%), according to a report released by Statistics Canada on Friday.
The federal agency said core retail sales—which exclude gasoline stations and fuel vendors and motor vehicle and parts dealers—were up 1.3% in July.In volume terms, retail sales edged down 0.2% in July.
“Based on respondent feedback, approximately 17% of Canadian retailers reported that their business activities in July had been affected by the strike at the ports in British Columbia,” said the report. “On an unadjusted basis, the largest estimated impacts on sales in dollar terms were at motor vehicle and parts dealers.
“Core retail sales increased 1.3% in July, led by higher sales at food and beverage retailers (+1.3%) and general merchandise retailers (+1.8%). Sales at food and beverage retailers were up on the strength of higher sales at supermarkets and other grocery retailers (except convenience retailers) (+1.5%), beer, wine and liquor retailers (+1.3%) and convenience retailers and vending machine operators (+1.0%) in July.
“The largest decrease in retail sales in July was observed at motor vehicle and parts dealers (-1.6%), which recorded their first decline in four months. Lower sales at new car dealers (-1.7%) led the decrease, followed by used car dealers (-3.1%). Automotive parts, accessories and tire retailers (+1.0%) were the only store type in this subsector to increase in July.
“Lower sales at gasoline stations and fuel vendors (-0.7%) also weighed on retail sales in July. In volume terms, sales at gasoline stations and fuel vendors decreased 1.0%.”
Statistics Canada is providing an advance estimate of retail sales, which suggests that sales decreased 0.3% in August.
Maria Solovieva, Economist with TD Economics, said retail trade entered the third quarter on a decent footing with solid gains in core categories – revealing a re-acceleration in spending momentum from an essentially flat second quarter.
“But that pick up is modest by historical standards, with real consumer spending tracking 1.4% quarter-on-quarter (annualized) for the third quarter, as outlined in our recent Quarterly Economic Forecast,” she said.
“Monetary policy’s long and variable lags are leaving a permanent mark on the Canadian consumer. By the Bank of Canada’s estimates, roughly 50% of mortgages that were initiated before they started raising interest rates last year will face higher rates by the end of this year. Meanwhile, families who rely on a more interest-rate sensitive consumer credit have already fully experienced the bitterness of higher rate medicine, and retail sales in real terms are softening. We think that weaker demand will translate into cooler inflation in the coming months, enabling the BoC to will remain on hold for the rest of the year.”
Robert Kavcic, Senior Economist with BMO Economics, said discretionary consumer spending is getting held back by inflation and surging borrowing costs.
“Another sign of sluggish growth for the Canadian economy while the Bank of Canada, at the same time, grapples with above-target inflation,” he said.
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