Canada’s retail sales fall again in August, consumption spending likely to grow at sub-2 pct rate this year

Canada’s retail sales dropped in August after revising down July’s print. The retail sales dropped 0.1 percent sequentially in August, missing the mark for the third consecutive time. Consensus forecast was for a rise of 0.3 percent. In volume terms, the result was even weaker, with sales declining 0.3 percent.

Looking at the details, the report was widely disappointing as sales dropped in seven of the 11 subsectors, accounting 57 percent of retail trade. The decline in the headline print was predominantly due to subdued sales at motor vehicles and parts dealers, clothing, building material and electronic stores that dropped 0.5 percent each.

The declines were not offset by modest rises seen amongst gasoline, food and health retailers, along with a strong rise of 1.7 percent at furniture and home furnishing stores.

Region wise, sales dropped in six provinces. The largest fall in dollar terms was witnessed in Ontario that recorded a fall of 0.7 percent, driven by lower sales at building material and garden equipment supplies.

Continued decline in sales was seen in Saskatchewan and Alberta. In British Columbia and Quebec, retail spending continued to be flat, whereas considerable rise of 1 percent to 1.7 percent was seen in the four remaining provinces, which were not sufficient to pull up the headline print, noted TD Economics.

Retail sales in Canada have dropped for the fourth straight month. Additionally, the fiscal stimulus that came during the end of July does not seem to have had any impact. Nominal sales and the volume of sales currently stand at 0.5 percent and 1.7 percent lower than their peak in February, respectively. However, the decline seen today was not sufficient to undo the strong increase in manufacturing sales seen in August.

Consumer spending is expected to grow at a sub-2 percent pace in the future, restricted by high-and-rising debt burdens and moderate rise in employment and incomes, according to TD Economics. While consumption is likely to continue being a strong backbone of the Canadian economic growth, there is likelihood that exports might do more of the heavy lifting.