Retail sales were slightly stronger than expected in June, when they edged up 0.1 percent on the month. The preliminary estimate for July points to a further advance of 0.4 percent. Sales were down 0.6 percent year-over-year in June.

While the headline index showed resilience, underlying details exposed a weaker picture. First, sales growth was revised down to 0.1 percent from 0.2 percent in May. In June, the advance was price related, as volumes were down 0.2 percent. In addition, gains were concentrated in three of nine subsectors, led by a 2.5 percent advance in motor vehicles and sales, without which sales would have been down 0.8 percent from May, for a 12-month decline of 3.3 percent. A 0.3 percent increase of sales at gasoline stations and fuel vendors also boosted the overall index. Excluding these two subsectors, core sales declined 0.9 percent in June.

Among core sales, the sporting goods, hobby, musical instrument, book, and miscellaneous subsector was up 0.4 percent, with cannabis up 2.6 percent. Other major categories posted declines on the month, led by housing-related sectors: furniture, home furnishings, electronics and appliances fell 1.6 percent and building material and garden equipment and supplies were down 1.4 percent. General merchandises also contracted 1.4 percent.

Sales growth was also concentrated regionally, with only four provinces reporting higher sales, led by Ontario and Quebec.

Over the second quarter, overall sales were unchanged, while volumes, more relevant to real GDP, contracted 0.8 percent.

While underlying data signal consumer demand weakened in the second quarter, inflation was stronger than expected in July, when retail sales could also rebound, based on Statistics Canada's preliminary estimate. In addition, Econoday's Consensus Divergence Index returned to positive territory, at 14 and within a range signaling a minor outperformance of the economy. Overall, the latest retail and inflation data leave the possibility of a rate hike on the table at the September meeting.

Retail sales in June are expected to hold unchanged following a 0.2 percent increase in May.

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.

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.