Canada’s retail sales drop in February, likely to stay supportive of consumer spending and economic growth

Canada’s retail sales pulled back in February after rising sharply in the prior month. Retail sales dropped 0.6 percent on a sequential basis in February, as compared with the sharp rise of 2.3 percent in January. Retail sales, in real terms, rose slightly, dropping by a more modest 0.1 percent. The decline was driven mainly by subdued weaker sales at gas stations, which recorded a drop of 3.6 percent, owing to reduced gas prices, and 1.8 percent fall in sales at motor vehicle and parts dealers, the first decline in seven months.

Region wise, the decline was broad based with Saskatchewan and New Brunswick being the exceptions, recording gains of 0.6 percent and 0.3 percent respectively.

In spite of a decline in February, the huge rise registered in January leaves retail sales quite above the levels witnessed in the fourth quarter of 2016. As such, retail sales are likely to be supportive of consumer spending and overall economic growth in the first quarter of 2017, noted TD Economics in a research report. The Canadian economy is likely to have expanded 3.4 percent quarter-on-quarter.

Volume of retail sales is likely to stay relatively solid in the future with the overall consumer spending likely to expand by a sound 2 percent rate in the remainder of 2017. The retail sales report for today is not expected to change the Bank of Canada’s opinion on monetary policy, with the overnight rate likely to stay on hold for some time, added TD Economics.