Canada Retail Sales Climb 0.9% in July, Seen Up Again in August — Update

By Robb M. Stewart

OTTAWA--Canadian shoppers have been a little more willing to spend over the summer, with retail sales up last month after the strongest rise in 10 months in July.

An advance estimate of retail receipts indicates sales increased 0.5% last month, Statistics Canada said Friday.

It comes after sales in July climbed 0.9% from the month before to a seasonally adjusted 66.38 billion Canadian dollars, the equivalent of about US$48.95 billion. That was stronger than economists were expecting and topped the data agency's prior projection for a 0.6% advance in sales after declines the previous two months.

Compared with a year earlier, retail sales in July were 0.9% higher.

Statistics Canada offered no details with the estimate for the latest month, which was based on the responses of roughly 52% of retailers surveyed and will be revised.

Carrie Freestone, an economist at Royal Bank of Canada, expects consumption to remain soft in the near term relative to the country's rapid population growth. Despite recent cuts in interest rates, stretched homeowners continue to wait for rates to fall further and many borrowers who had locked in ultra-low fixed-rate mortgages still face higher debt payments when mortgages are renewed this year and next, she said.

Anonymized debit- and credit-card data from Royal Bank suggest Canadians' spending slowed again in August, with travel and hospitality demand fading and home and renovation-related spending remaining weak.

In July, sales were up in seven of nine retail segments tracked by the data agency, led by a rebound in motor vehicles sales that more than offset a fall in receipts at gas stations and fuel vendors.

Core retail trade, which excludes car and auto-parts dealers and gas stations, was up 0.6% from June, a second straight monthly increase.

Sales at supermarkets and other food and beverage retailers rose for the month, and Canadians also spent more on health and personal care. Spending at dealers of building materials and garden equipment and supplies was down.

In volume terms, price-adjusted sales climbed 1.0% from June and were 2.2% higher than a year earlier, hinting at a solid tailwind for industry-level gross domestic product that Statistics Canada previously estimated was flat for a second straight month in July.

Wholesalers, the largest component of Canada's services sector, saw sales volumes grow 0.5% in July, while factory sales climbed 0.9% in volume terms.

The Bank of Canada early this month cut its benchmark interest rate for a third time in as many policy meetings as inflation continues to ease and unemployment edges higher. Economists widely expect another rate cut at the next central-bank meeting in October after annual inflation cooled to the Bank of Canada's 2% target in August, and given GDP on a per-capita basis has been down in seven of the past eight quarters.

Write to Robb M. Stewart at robb.stewart@wsj.com

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September 20, 2024 08:59 ET (12:59 GMT)

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