CA: Retail Sales

Fri Apr 17 07:30:00 CDT 2015

Consensus Actual Previous Revised
Month over Month 0.5% 1.7% -1.7% -1.4%
Year over Year 2.5% 1.2% 1.3%

Retail sales rebounded unexpectedly well in February. A 1.7 percent monthly jump failed to reverse a cumulative decline of 3.2 percent in December/January but was still well above market forecasts and the sharpest increase since June 2014.

Volumes also had a good month, advancing 1.3 percent versus the start of the year.

Within the headline nominal rise all eleven subsectors reported higher monthly sales. Particularly strong growth was seen in general merchandise (5.6 percent) and at sporting goods, hobby, book and music stores (8.4 percent). Motor vehicle and parts gained 0.9 percent and excluding this category purchases rose 2.0 percent on the month and 1.4 percent on the year. Furniture and home furnishings (1.7 percent), clothing and accessories (0.9 percent) and food and drink (0.6 percent) also enjoyed strong demand while higher prices saw gasoline sales up 2.2 percent.

Despite February's bullish results, average monthly sales for the first two months of the first quarter were still 1.5 percent below their fourth quarter mean. Indeed, it will take a monthly bounce of nearly 4 percent for first quarter retail demand just to match the previous period's level.

The new BoC MPR forecast revised down official expectations for first quarter GDP growth to just flat. Today's figures may make for some upside risk to this but the period will still look very soft. That said, weakness at the start of the year is built into the current policy stance and it will probably take a poor second quarter (or sharp appreciation by the C$) to trigger another cut in official interest rates.

Retail sales measure the total receipts at stores that sell durable and nondurable goods.

With consumer spending a large part of the economy, market players continually monitor spending patterns. Data are available both for total retail sales and those excluding autos and for 16 different store specializations. Since autos account for over 25 percent of retail sales, the sector can have a pronounced impact on overall sales given their volatility. Retail sales are used to estimate the goods portion of personal consumer expenditures in the quarterly GDP accounts, accounting for about 50 percent of the total.

The pattern in consumer spending is often the foremost influence on stock and bond markets. For stocks, strong economic growth translates to healthy corporate profits and higher stock prices. For bonds, the focus is whether economic growth goes overboard and leads to inflation. Ideally, the economy walks that fine line between strong growth and excessive (inflationary) growth.

Retail sales not only give you a sense of the big picture, but also the trends among different types of retailers. Perhaps apparel sales are showing exceptional weakness but electronics sales are soaring. These trends from the retail sales data can help you spot specific investment opportunities, without having to wait for a company's quarterly or annual report.