Key facts
- Canadian retail sales are expected to rise 0.4% in June, following a 1.0% increase in May.
- The increase was primarily driven by sales of motor vehicles and parts.
- Excluding motor vehicles and gasoline, retail sales decreased by 0.9% in June.
- Consumers are cutting back on purchases in most categories due to rising interest rates.
- Advance data indicates a projected 0.4% increase in retail sales for July.
Canadian retail sales are anticipated to show a 0.4% increase in June, building on a 1.0% rise in May, according to advance estimates from Statistics Canada. This would mark the sixth consecutive month of growth. However, detailed data reveals that the overall increase was solely driven by a significant jump in motor vehicle and parts sales, which rose by 2.9% for new cars and 0.9% for used cars. This surge is attributed to consumers finally receiving vehicle orders placed months or over a year ago due to extended wait times.
Excluding motor vehicles, retail sales saw a notable decline of 0.8% in June. When both motor vehicles and gasoline are excluded, the decrease widens to 0.9%. This broad-based pullback in consumer spending across categories like food, clothing, and furniture indicates that rising interest rates are impacting household budgets, as the Bank of Canada intended. Spending on gasoline also saw a modest increase of 0.3%.
Advance data suggests that retail sales are expected to rise by 0.4% in July, coinciding with the peak summer travel season. However, economists anticipate that as vehicle payments begin to impact household finances, consumer spending will likely be reined in. The current retail sales figures suggest that interest rate hikes are effective, and the Bank of Canada may have reached its peak policy rate at 5%.