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Canadian retail sales rise in February, consumer spending likely to contribute to economic growth in 2018

Canada’s retail sales grew in the month of February. Sales were up 0.4 percent. The rise was almost entirely because of volumes, which rose 0.3 percent. But volumes were downwardly revised markedly in the prior three months.

Increased sales at motor vehicle and parts dealers mainly drove the rise in February. Motor vehicle and parts dealers recorded a 1.4 percent rise in sales. Sales came in higher at general merchandise stores and miscellaneous retailers. On the opposite end of the spectrum, sales fell in most other categories, with marked falls in furniture, home furnishing and electronics, gasoline stations and clothing accessories stores.

Region wise, sales rose in ten provinces, though the majority of the gain was focused in Ontario. There were also comparatively large gains in Nova Scotia, Saskatchewan and Quebec. On the contrary, sales fell in Manitoba and Alberta, while falling slightly in Newfoundland and Labrador.

Though volumes rose in February, downward revisions to earlier months suggest softer spending momentum early in 2018 than previously thought. So far in the first quarter, volumes fell 1.5 percent compared to the fourth quarter’s average, indicating towards weaker consumer spending in the first quarter.

However, consumer spending is expected to add to economic growth this year, buoyed by a sound labor market, noted TD Economics in a research report. But some easing is expected from last year’s turbocharged rate, as spending is dampened by weaker housing market activity and rising interest rates.

“As such, today's report likely does little to alter current outlook at the Bank, with policymakers likely to continue a gradual pace of normalization, with the next hike expected this summer”, added TD Economics.

At 16:00 GMT the FxWirePro's Hourly Strength Index of Canadian Dollar was neutral at -22.8132, while the FxWirePro's Hourly Strength Index of US Dollar was highly bullish at 102.876. For more details on FxWirePro's Currency Strength Index, visit http://www.fxwirepro.com/currencyindex

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