Canada retail sales increased 0.4% in August, following a 0.9 percent increase in July, and compared to expectations of a 0.5 percent rise in the Econoday consensus forecast. Statscan said sales were up in just four of nine subsectors, led by increases in sales by automotive and parts dealers.

Retail sales are up 1.4 percent from August 2023, following a 0.9 percent jump on an annual basis in July.

The August retail sales data underscores the Bank of Canada's concerns about flagging economic activity, which prompted its 50-basis point rate cut this week. The BoC does expects lower borrowing costs to eventually arrest the decline in consumer spending, although overall consumption isn't expected to pick up until the second half of 2025.

On a monthly basis, August's largest increase in retail sales in August was at motor vehicle and parts dealers (+3.5 percent). Higher sales at new car dealers (+4.3 percent) led the increase, followed by used car dealers (+4.3 percent). Sales at gasoline stations and fuel vendors were down 2.7 percent in August.

Core retail sales, excluding gasoline stations, fuel vendors and auto dealers, fell in August after two consecutive months of increases. They are down 0.4 percent after a 0.6 percent increase in July. Core sales rose 0.3 percent compared to August 2023, following a 0.5 percent year-over-year increase in July.

Core retail sales were dragged down by a decline in sales at food and beverage retailers (-1.5 percent). All four categories within that index fell, with supermarkets and grocery stores (-1.9 percent) leading the way. Furniture, home furnishings, electronics and appliance retailers (-1.4 percent) also experienced a decline in sales for August.

E-commerce sales fell 2.5% percent in August, after a 3.4 percent rise in July, making up 5.9 percent of total retail trade compared with 6.1 percent in July.

Canada's retail sales for August are expected to increase 0.5 percent, slightly less than July's 0.9 percent increase.

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.