Retail sales in Canada proved weaker than expected in February, when they retreated a further 0.1 percent following 0.3 percent contraction in January. The advance estimate for March points to flat sales. February's volumes, more relevant to real GDP, were down 0.3 percent on the month.

As the Bank of Canada continues to monitor the balance of supply and demand in the economy, which it said moved into excess supply in the second half of 2023, the latest data strengthen the case for considering lowering the policy rate.

February's details were no better than mixed, with five of nine sectors recording lower sales, led by a 2.2 percent drop in gasoline and fuel (the decrease was 3.9 percent in volume). Housing-related sales also declined over the month: building material and garden equipment and supplies were down 0.4 percent and furniture, home furnishings, electronics and appliances contracted 1.5 percent. Clothing and accessories fell 1.0 percent and sporting goods and miscellaneous were down 0.2 percent.

On the upside, motor vehicles and parts increased 0.5 percent. Excluding this sector, sales would have been down 0.3 percent instead of 0.1 percent. But with gasoline and fuel up, core sales excluding the two categories were flat.

Regionally, sales declines were broad based across seven provinces, led by Alberta.

Sales increased 1.2 percent year-over-year.

Retail sales in February are expected to rise 0.1 percent on the month after falling 0.3 percent in January.

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.