| Consensus | Consensus Range | Actual | Previous | |
|---|---|---|---|---|
| Month over Month | -1.1% | -0.1% to -0.9% | -1.1% | 0.3% |
| Year over Year | 4.9% | 5.0% |
Highlights
The impact of trade tensions was felt by retailers in May, when their sales contracted 1.1 percent from April, as expected. Much of the weakness was related to the auto sector that had been performing well previously.
Advance indicators point to a 1.6 percent recovery in June.
The report shows that 32% of retail businesses were impacted by the trade tensions in May, compared with 36% in April. Price gains, lower product demand and higher expenses for raw materials, shipping or labor are the most common impacts reported by retailers.
In volumes, more relevant to real GDP, retail sales were down an even larger 1.4 percent on the month.
Advance GDP data had already pointed to a decline in retail trade in May. Looking ahead, the Bank of Canada Canadian Survey of Consumer Expectations (CSCE) shows that the CSCE indicator measuring the opinions of Canadian consumers about their spending plans, the labour market and their personal finances declined in the second quarter due to weakening spending intentions related to tariffs and economic uncertainty. The survey also shows that more consumers are planning to cut spending in response to their inflation expectations. And that's the other side of the equation: core inflation is holding above the 2 percent BoC target, leaving the BoC between a rock and a hard place, which might lead the central bank to give itself more time to assess the impact of tariffs as the deadline for negotiations between Canada and the U.S. approaches. The fact that core sales held up also provides an argument to continue to wait.
In May, retail sales declines were concentrated in three sectors, led by a 3.6 percent drop in motor vehicles and parts, without which the decline in retail sales would have been limited to 0.2 percent. The decline comes after two consecutive months of increases. Gasoline and fuel was another key downward contributor, with sales down 1.4 percent.
Core sales, excluding gasoline stations, fuel vendors and auto and parts dealers, were unchanged on the month. Food and beverages saw a 1.2 percent drop, the only core sector to report a monthly decline.
Sales increased in all other core sectors. Housing-related sales increased on the month, with building material and garden equipment and supplies up 1.9 percent, the largest monthly gain among core sectors. Sales of furniture, home furnishings, electronics and appliances were up 0.5 percent.
E-commerce sales were down 1.7 percent in May, making up 6.2 percent of total retail trade, down from 6.3 percent in April.
Advance indicators point to a 1.6 percent recovery in June.
The report shows that 32% of retail businesses were impacted by the trade tensions in May, compared with 36% in April. Price gains, lower product demand and higher expenses for raw materials, shipping or labor are the most common impacts reported by retailers.
In volumes, more relevant to real GDP, retail sales were down an even larger 1.4 percent on the month.
Advance GDP data had already pointed to a decline in retail trade in May. Looking ahead, the Bank of Canada Canadian Survey of Consumer Expectations (CSCE) shows that the CSCE indicator measuring the opinions of Canadian consumers about their spending plans, the labour market and their personal finances declined in the second quarter due to weakening spending intentions related to tariffs and economic uncertainty. The survey also shows that more consumers are planning to cut spending in response to their inflation expectations. And that's the other side of the equation: core inflation is holding above the 2 percent BoC target, leaving the BoC between a rock and a hard place, which might lead the central bank to give itself more time to assess the impact of tariffs as the deadline for negotiations between Canada and the U.S. approaches. The fact that core sales held up also provides an argument to continue to wait.
In May, retail sales declines were concentrated in three sectors, led by a 3.6 percent drop in motor vehicles and parts, without which the decline in retail sales would have been limited to 0.2 percent. The decline comes after two consecutive months of increases. Gasoline and fuel was another key downward contributor, with sales down 1.4 percent.
Core sales, excluding gasoline stations, fuel vendors and auto and parts dealers, were unchanged on the month. Food and beverages saw a 1.2 percent drop, the only core sector to report a monthly decline.
Sales increased in all other core sectors. Housing-related sales increased on the month, with building material and garden equipment and supplies up 1.9 percent, the largest monthly gain among core sectors. Sales of furniture, home furnishings, electronics and appliances were up 0.5 percent.
E-commerce sales were down 1.7 percent in May, making up 6.2 percent of total retail trade, down from 6.3 percent in April.
Market Consensus Before Announcement
Forecasters agree with Stats Canada’s advance estimate that sales dropped 1.1 percent in May after gaining 0.3 percent in April. The culprit is falling auto sales on payback from strong gains lately. Sales ex-autos remain decent as consumer spending is holding up surprisingly well.
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.
