Canadian Retail Sales Increase 0.1% Following January Downturn

Canadian retail sales up 0.1% after January dip

Canadian retail sales demonstrated a tentative rebound in February, but the faint uptick failed to fully offset the sharper decline witnessed earlier in the year, hinting at a faltering momentum in consumer spending. Statistics Canada’s latest release on Friday revealed a marginal 0.1% increase in retail receipts last month. This follows a notable 0.3% downturn in January, which marked the most substantial drop since March 2023.

Sectoral Analysis:

Canadian retail sales faced a setback in January, primarily stemming from diminished sales at automobile and parts dealerships. Additionally, sectors such as food and beverage retail and clothing outlets experienced declines, adding to the economic unease.

Positive Indicators:

However, there were positive indicators within the data. Excluding automobile sales, retail transactions surged by a surprising 0.5% in January, outpacing predictions of a 0.4% decline. Core retail sales, which exclude gas stations and car dealerships, witnessed a 0.4% increase in January. The growth was propelled by sectors like sporting goods and hobby retailers, as well as building materials.

“Retail data for January, excluding autos, revealed promising signs with unexpected surges in transactions,” according to Barron’s Subscription.

Economic Outlook:

Friday’s report, in conjunction with easing price pressures and a cooling job market, underscores challenges for Canadian consumers. There is currently no imminent evidence suggesting a sharp drop in retail activity. Consequently, there is no immediate need for an interest rate cut by the Bank of Canada. However, the stagnation in sales growth, particularly on a per capita basis, will likely prompt policymakers to consider easing measures. This is expected to occur in the coming months.

Expert Insights:

Benjamin Reitzes, a rates and macro strategist at Bank of Montreal, remarked via email that “consumer spending remains sluggish, albeit sustained by substantial population growth.” However, he cautioned that this demographic boost may diminish over time. This follows recent government announcements to limit the influx of temporary residents into the country.

Andrew Grantham, an economist at Canadian Imperial Bank of Commerce, concurred. He stated in a report to investors that “today’s figures indicate that consumer spending is struggling to expand in an environment of higher interest rates, though it is not collapsing.”

Regional Variances:

Regionally, sales showed a mixed picture. While British Columbia, Alberta, Saskatchewan, and Quebec experienced declines, Ontario witnessed the most significant provincial increase.

Data Collection:

The statistics agency did not provide detailed information on the February estimate, citing responses from 58.5% of surveyed companies. Nonetheless, the average final response rate for the survey over the previous 12 months stood at 88.1%. This indicates a relatively robust data collection process.

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