OTTAWA (Reuters) -Canadian retail sales grew much more than expected in April and will likely post another gain in May, data showed on Wednesday, bolstering the chances that the Bank of Canada will raise rates again in next month.
Retail sales climbed 1.1% in April, higher than a median forecast for a 0.2% increase, Statistics Canada said. In a preliminary estimate, Statscan said sales increased by another 0.5% in May.
"Coming off a strong first quarter of consumer spending, a second consecutive monthly move higher is not what the Bank of Canada will be looking for as it hopes to slow domestic demand," Randall Bartlett, senior director of Canadian economics at Desjardins, said in a note.
"As such, today's retail print just works to reinforce our call that another 25-basis-point hike in July is likely," Bartlett said.
Money markets see a 75% chance of a 25-basis point rate hike at the July 12 policy decision, up from 64% before the retail sales data, and are close to fully pricing in two rate increases by December.
The Canadian dollar was trading 0.3% higher at 1.3198 to the greenback, or 75.77 U.S. cents.
In April, gains were recorded in eight of nine sub-sectors that represent 94.5% of retail trade, leading with general merchandise and clothing and clothing accessories retailers, the agency said. By volume, sales grew by 0.3% in the month.
The data comes after a series of surprisingly strong economic data that led to the Bank of Canada to raising its overnight rate to a 22-year high of 4.75% earlier this month.