Canadian retail sales fall sequentially in August

Canadian retail sales dropped 0.1 percent on a sequential basis in August, after an upwardly revised 0.6 percent rise in July. Today’s data is below consensus expectations of a rise of 0.4 percent. Excluding price effects, the picture came in slightly better, with volumes rising at a modest rate of 0.2 percent. Sales dropped in six of the major categories out of 11. The headline fall was mostly due to lower sales at food and beverages stores and gasoline stations. Sales at general merchandise stores, and motor vehicle and parts dealers provided some offset.

The weak performance was regionally concentrated. Out of 10 provinces, only 4 saw retail sales dropped in August. Lower sales in Ontario and Manitoba added the most to the fall. Stronger performances in British Columbia and New Brunswick provided some offset.

Retail trade data for August does not change the underlying trend of subdued retail sales and volumes growth, noted TD Economics in a research report. The volumes gain and positive July revisions do however, generate some upside risk to the third quarter GDP tracking of 1.4 percent.

“Continued strength in labour and housing market momentum (as seen in recent data) should provide some modest support to the sector, but household debt levels and high debt-service costs will continue to act as a damper against any acceleration in consumer spending. The result: expect more ho-hum reports to come”, added TD Economics.