Canada’s retail sales rise above expectations in May

Canada’s retail sales continued to rise in May. Retail sales grew 0.6 percent sequentially in May, as compared with consensus expectation of a rise of 0.2 percent. In real terms, the retail sales volumes rose 1.1 percent.

May’s rise stemmed greatly from sales at motor vehicle and parts dealers that rose 2.4 percent, as total retail sales excluding autos dropped 0.1 percent. Electronics and appliance stores and food and beverage stores also contributed to the headline print. Most other subsectors recorded drops in the month, led by general merchandise and health and personal care stores.

Region wise, the gains were widespread, led by British Columbia and Alberta. P.E.I and Quebec recorded a decline in retail sales in the month.

The string of higher retail sales volumes reported in the last few months augurs well for overall growth in the second quarter, which is tracking just above 3 percent. While a strong labor market performance should assist in keeping household spending at healthy levels momentum is likely to wane over the second half of the year, as an easing housing market in Ontario is expected to restrain demand for housing related items while rising interest rates take some steam out of consumer spending overall, noted TD Economics.

Despite a weak inflation backdrop, the better-than-expected performance of the Canada’s economy, especially on the domestic front, should permit the Bank of Canada to follow through another rate hike in October, fully unwinding the emergency cuts that were put in place after the oil price collapse, added TD Economics.

At 16:00 GMT the FxWirePro's Hourly Strength Index of Canadian Dollar was slightly bearish at -54.8361, while the FxWirePro's Hourly Strength Index of US Dollar was neutral at -11.9062. For more details on FxWirePro's Currency Strength Index, visit http://www.fxwirepro.com/currencyindex

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