Canadian retail sales fall in May, likely to trend higher in 2019 albeit modestly

Canada’s retail sales growth eased in the month of May. Sequentially, the retail sales dropped 0.1 percent after it grew 0.2 percent in the prior month. This is below consensus expectations of a rise of 0.3 percent. Excluding price movements, the picture was more disappointing, with volumes falling 0.5 percent.

Out of 11 major categories, retail sales fell in only four. The fall in sales at food and beverage stores (-2 percent) mainly drove down the headline figure. Sales also dropped at clothing and clothing accessories stores and sporting, hobby, book, and music stores. Higher sales at gasoline stations and motor vehicles and parts dealers provided some offset.

Region wise, retail sales dropped in 8 out of 10 provinces. Alberta, Manitoba, and Nova Scotia drove the bulk of the decline. Sales growth in Quebec and Ontario was decent. A solid recovery is still expected in the second quarter of this year.

“Looking ahead, retail sales and consumer spending more generally should trend higher in 2019, albeit only modestly, supported by tailwinds from solid labour market conditions, wage gains, and reduced borrowing costs”, said TD Economics.

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