Weekly Economic Watch

Canada – Retail sales rose 0.6% in July, reversing the prior month’s decline. The increase was one tick better than expected by consensus. Sales were up in 8 of the 11 sub-sectors. Auto sales were down 0.6%, their first drop in seven months. Excluding autos, sales advanced 1%, more than reversing the prior month’s retreat and topping consensus, which expected a jump of 0.6%. Ex-auto sales got a boost from gasoline sales (+3.2%). However, sales were still up 0.6% even after excluding autos and gasoline. Higher sales were registered in miscellaneous stores (+2%), clothing/accessories (+1.9%), sporting goods (+1.7%), furniture/home furnishings (+1.6%), general merchandise (+1.1%), health/personal care (+0.6%) and building materials (+0.4%). These more than offset lower sales in electronics (-0.5%) and food/beverage (-0.3%). Discretionary spending (i.e., total sales less gasoline, food and health care products) grew in July but not enough to reverse the prior month’s decline. Higher gasoline prices might have restrained spending a bit as evidenced by the fact that gasoline sales as a share of total retail sales sprang to 12.7%, their highest mark this year.

Both Ontario and Quebec saw retail sales progress. In Alberta, sales swelled a mere 0.1%, failing to make up for the prior month’s contraction. However, on a year-on-year basis, Alberta continued to lead the nation with 6.4% growth.

The increase in July retail sales was primarily due to volumes. In real terms, though overall sales climbed 0.5%, this did not make up for the prior month’s 1.3% slump. Still, the higher volumes, together with earlier-reported gains in real manufacturing and wholesale trade, constitute a winning trifecta that should help boost July GDP about 0.4%.

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