| Consensus | Actual | Previous | Revised | |
|---|---|---|---|---|
| Month over Month | -1.4% | -1.4% | -0.2% | |
| Year over Year | 2.4% | 4.3% | 4.1% |
Highlights
Retail sales contracted 1.4 percent in March, as expected, bringing the 12-month growth rate down to 2.4 percent from a downwardly revised 4.1 percent in February. The flash estimate points to a modest 0.2 percent recovery in April.
In March, 5 of 9 subsectors posted declines, representing 55.5 percent of retail trade, led by a 4.4 percent drop in vehicles and parts and a 3.9 percent (1.3 percent in volume) decrease in gasoline and fuel. Excluding these two subsectors, sales managed to increase 0.3 percent, indicative of an underwhelming performance of core retail sales as well. Excluding motor vehicles and parts alone, sales were down 0.3 percent. Volumes explained much of March's weakness, as they fell 1.0 percent from February.
Helping core sales were building material and garden equipment and supplies, as well as sporting goods, hobby, musical instrument, book, and miscellaneous, with both categories increasing 1.6 percent. The largest decline was a 1.2 percent retreat in clothing, clothing accessories, shoes, jewelry, luggage and leather goods sales.
Overall retail sales were up 0.7 percent in the first quarter, but volumes, more relevant to real GDP, increased 1.2 percent.
Regionally, weakness was widespread across Canada, with sales down in nine provinces, led by Ontario. British Columbia was the only one to post an increase.
Today's decline is in line with the Bank of Canada's scenario of slowing domestic demand, the question being more about the timeline of the slowdown. Econoday's Consensus Divergence Index, at 43, remains within the zone consistent with an economy that is performing appreciably stronger than expected, leaving the possibility of a tightening still on the table.
The Bank of Canada projects household consumption to contribute less and less to GDP growth, for a total of 1.1 percentage points in 2023 and 0.5 points in 2024, down from 2.6 point in 2022. But this alone isn't enough to reassure the central bank, which needs to see the labour market rebalance with a moderation in wage growth, businesses slow the pace of their price hikes, and inflation expectations come down. Governor Tiff Macklem reminded earlier this week that"monetary policy still has work to do". That being said, aggressive tightening is a risky option as the central bank highlighted in its latest Financial System Review published Thursday that households' ability to service their debts is one of the"key areas of concern". So any hike is likely to be on the more moderate side.
In March, 5 of 9 subsectors posted declines, representing 55.5 percent of retail trade, led by a 4.4 percent drop in vehicles and parts and a 3.9 percent (1.3 percent in volume) decrease in gasoline and fuel. Excluding these two subsectors, sales managed to increase 0.3 percent, indicative of an underwhelming performance of core retail sales as well. Excluding motor vehicles and parts alone, sales were down 0.3 percent. Volumes explained much of March's weakness, as they fell 1.0 percent from February.
Helping core sales were building material and garden equipment and supplies, as well as sporting goods, hobby, musical instrument, book, and miscellaneous, with both categories increasing 1.6 percent. The largest decline was a 1.2 percent retreat in clothing, clothing accessories, shoes, jewelry, luggage and leather goods sales.
Overall retail sales were up 0.7 percent in the first quarter, but volumes, more relevant to real GDP, increased 1.2 percent.
Regionally, weakness was widespread across Canada, with sales down in nine provinces, led by Ontario. British Columbia was the only one to post an increase.
Today's decline is in line with the Bank of Canada's scenario of slowing domestic demand, the question being more about the timeline of the slowdown. Econoday's Consensus Divergence Index, at 43, remains within the zone consistent with an economy that is performing appreciably stronger than expected, leaving the possibility of a tightening still on the table.
The Bank of Canada projects household consumption to contribute less and less to GDP growth, for a total of 1.1 percentage points in 2023 and 0.5 points in 2024, down from 2.6 point in 2022. But this alone isn't enough to reassure the central bank, which needs to see the labour market rebalance with a moderation in wage growth, businesses slow the pace of their price hikes, and inflation expectations come down. Governor Tiff Macklem reminded earlier this week that"monetary policy still has work to do". That being said, aggressive tightening is a risky option as the central bank highlighted in its latest Financial System Review published Thursday that households' ability to service their debts is one of the"key areas of concern". So any hike is likely to be on the more moderate side.
Market Consensus Before Announcement
Retail sales in March are expected to fall 1.4 percent following a 0.2 percent dip in February.
Definition
Retail sales measure the total receipts at stores that sell durable and nondurable goods. The headline data are reported in cash terms and disaggregated into eleven main subsectors. Aggregate volume figures are also provided.
Description
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.
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.
