| Consensus | Actual | Previous | Revised | |
|---|---|---|---|---|
| Month over Month | 0.5% | 0.2% | 1.1% | 1.0% |
| Year over Year | 0.5% | 2.9% |
Highlights
Retail sales were weaker than expected in May, when they increased 0.2 percent on the month, below Econoday's consensus forecast of 0.5 percent. May marked a slowdown from April's downwardly revised 1.0 percent rebound. Sales were up 0.5 percent year-over-year, down from 2.9 percent the previous month. The preliminary estimate for June points to a further slowdown leading to flat monthly sales.
In May, real sales edged up 0.1 percent, indicating that underlying activity was even weaker than the headline suggested.
Nominal sales rose in five of nine subsectors, led by motor vehicles and parts (0.8 percent) and food and beverages (1.0 percent). Excluding motor vehicles and parts, sales were unchanged from April. Core sales, which also exclude gasoline fuel, were flat. Gas stations and fuel vendors reported no change.
Sporting goods, hobby, musical instrument, book, and miscellaneous retailers reported a 0.8 percent increase, and furniture, home furnishings, electronics and appliances retailers reported a 0.3 percent advance.
Building material and garden equipment and supplies were down 1.5 percent, recording the largest decline of the major categories.
Regionally, sales increased in six provinces, led by British Columbia and Alberta.
With today's below-expected sales, Econoday's Consensus Divergence Index, at minus 19, is consistent with an economy that is slightly underperforming. Combined with the preliminary estimate pointing to a further retail slowdown in June, and the lowest inflation rate since March 2021, the data are a positive development for the central bank still wary of excess demand. In addition, a new survey from the non-profit Angus Reid Institute finds one-third of Canadians saying they expect significant challenges due to the latest Bank of Canada's rate hike and an overall three-in-five say it will have a negative impact on their personal finances.
Yet the central bank will likely need further reassurance that its tightening is having a stronger impact on demand than it has had so far. In its latest economic assessment, the BoC stressed that excess demand was persisting, supported by"robust" consumer spending on services, while spending on goods hadn't been slowing as much as expected in response to higher interest rates. It cited rapid population growth, savings accumulated since the beginning of the pandemic and a tight labor market as factors supporting spending. On the latter front, employment data showed the Canadian economy added a surprisingly strong 60,000 jobs in June, including 32,600 in wholesale and retail, indicating strong activity in the sector.
In May, real sales edged up 0.1 percent, indicating that underlying activity was even weaker than the headline suggested.
Nominal sales rose in five of nine subsectors, led by motor vehicles and parts (0.8 percent) and food and beverages (1.0 percent). Excluding motor vehicles and parts, sales were unchanged from April. Core sales, which also exclude gasoline fuel, were flat. Gas stations and fuel vendors reported no change.
Sporting goods, hobby, musical instrument, book, and miscellaneous retailers reported a 0.8 percent increase, and furniture, home furnishings, electronics and appliances retailers reported a 0.3 percent advance.
Building material and garden equipment and supplies were down 1.5 percent, recording the largest decline of the major categories.
Regionally, sales increased in six provinces, led by British Columbia and Alberta.
With today's below-expected sales, Econoday's Consensus Divergence Index, at minus 19, is consistent with an economy that is slightly underperforming. Combined with the preliminary estimate pointing to a further retail slowdown in June, and the lowest inflation rate since March 2021, the data are a positive development for the central bank still wary of excess demand. In addition, a new survey from the non-profit Angus Reid Institute finds one-third of Canadians saying they expect significant challenges due to the latest Bank of Canada's rate hike and an overall three-in-five say it will have a negative impact on their personal finances.
Yet the central bank will likely need further reassurance that its tightening is having a stronger impact on demand than it has had so far. In its latest economic assessment, the BoC stressed that excess demand was persisting, supported by"robust" consumer spending on services, while spending on goods hadn't been slowing as much as expected in response to higher interest rates. It cited rapid population growth, savings accumulated since the beginning of the pandemic and a tight labor market as factors supporting spending. On the latter front, employment data showed the Canadian economy added a surprisingly strong 60,000 jobs in June, including 32,600 in wholesale and retail, indicating strong activity in the sector.
Market Consensus Before Announcement
Retail sales in May are expected to rise 0.5 percent following a much stronger-than-expected 1.1 percent increase in April.
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.
