Canada: Retail sales give back little of May gain in June – RBC CM

According to Nathan Janzen, Senior Economist at RBC Capital Markets, suggests that the 0.2% dip in Canada’s headline retail sales — a 0.3% decline excluding the impact of prices — retraced little of a big 2.2% jump in May. 

Key Quotes

“Sales of motor vehicles and parts edged down 0.7% on a monthly basis but sale volumes in the sector were still up almost 2% from year-ago levels that were already historically very high.”

“Sales posted a 0.3% increase in June excluding autos and a price-led 2% drop at gasoline stations.  That built on a 1.1% jump in May.  Sale volumes in Q2 as a whole still bounced back 3.7% at an annualized rate after falling almost 5% in Q1.”

“Including spending on services not captured in the retail report,  underlying consumer spending growth trends still look respectable, albeit down from the unsustainably strong pace in 2017.”

“We expect overall GDP growth inched up 0.1% in June.  That leaves overall Q2 GDP tracking around a 3% gain after a 1.3% increase in  Q1.”

“Looking through quarterly wiggles, though, we are still expecting a modestly above-trend 2.0% increase in GDP in 2018 as a whole.”

“The economy still looks to be growing at a respectable pace while already probably running at or above capacity limits.  Barring an unexpected surprise, that should warrant further gradual interest rate hikes.”