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Canada’s retail sales rise in June, pace of rise likely to moderate going forward

The momentum of Canada’s retail sales extending into June, with sales rising 0.1 percent in the month. The growth in real terms was more pronounced, with volumes of retail sales rising 0.5 percent. Gains in June were driven by higher sales at general merchandise stores, clothing and accessories stores and building material and garden equipment dealers, noted TD Economics in a research report.

June’s gains were led by increased sales at general merchandise stores, clothing and accessories stores and building material and garden equipment dealers. In the meantime, sales at motor vehicle and parts dealers and gasoline stations provided some offset. Stripping these two subsectors, retail sales grew 1.1 percent in the month.

Region wise, the results came in mixed, with sales rising in 5 provinces. British Columbia led the way, followed by Alberta and Nova Scotia. In Ontario, retail sales dropped 0.7 percent.

Solid rises in sales volumes in recent months have pushed retails sales by 2.1 percent in the second quarter as a whole. This augurs well for the overall economic growth, which is tracking 3.7 percent for the quarter.

The strong rate of growth is expected to moderate going forward, stated TD Economics. The easing of housing market, especially in Ontario, is expected to be a drag on demand, particularly for housing related goods. In the meantime, rising interest rates should aid in reining in household spending more broadly. However, credit channels continue to be healthy and overall consumer spending is expected to grow by nearly 2 percent in the second half of 2017, remaining an important support for the overall economy, added TD Economics.

But even with a moderation in household spending, the Bank of Canada is expected to stay in tightening mode. According to TD Economics, the central bank is expected to hike its rate again in the fall of this year.

At 15:00 GMT the FxWirePro's Hourly Strength Index of Canadian Dollar was slightly bullish at 59.9294, while the FxWirePro's Hourly Strength Index of US Dollar was neutral at -34.8091. For more details on FxWirePro's Currency Strength Index, visit http://www.fxwirepro.com/currencyindex

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