Canada’s monthly retail sales report for July will be coming out later today.
According to the economists polled, Canada’s retail sales are forecast to rise by 0.8% on the month. Meanwhile, core retail sales, excluding autos are to rise 0.4% according to estimates.
The forecasts for July show that economists expect a rebound in retail sales figures. The primary reason behind this view is the higher gasoline prices in Canada during the period.
Auto sales have also risen during the month which could contribute to a better headline print compared to the previous month.
The retail sales figures will also mark the start of the third quarter.
In the whole of the second quarter, Canada’s retail sales rose 1.5% on a year over year and non-seasonally adjusted basis. Retail sales slowed in the second quarter of this year, following a 1.8% increase in the first quarter.
The retail sales report is unlikely to influence the Bank of Canada policymakers. But it could provide a glimpse into the spending and savings pattern among households.
The BoC is one of the few central banks that are yet to cut interest rates.
Canada’s economy has been through somewhat of a swing. The data for the first half showed a weaker pace of growth. However, growth is rising as forecast by the Bank of Canada.
Gasoline & Auto Sales to Push Retail Sales Up
During July, two main components showed some strong gains. These were gasoline and auto sales.
Gasoline prices were seen rising as much as 4% on a month over month basis, alongside an increase in the auto sales during the period. However, there could still be some downside risks.
That said, various other related economic indicators show that consumer spending might have increased. Canada’s labor market, as is the case with many other economies, continues to be a strong point.
Although the labor market report has been somewhat volatile, it has been generally trending higher. Canada’s unemployment rate ticked higher during July. The unemployment rate rose from 5.5% to 5.7% during the month.
Meanwhile, the economy lost 2,200 jobs during the period. The increase in the unemployment rate came amid more people looking for work. This is considered to be a good sign for the economy.
Due to the fact that both the unemployment rate and jobs fell during the month, there is a possibility that while retail sales will increase. There is a good chance that the retail sales figures for July could come at a slower pace.
With interest rates being stable and inflation fairly close to the BoC’s 2% inflation target rate, there is a chance that spending among consumers will increase. This will be seen on how the retail sales data will come out later today.
The BoC is not in a rush to lower interest rates. However, many expect that the next move will be a rate cut.
For the moment, the July retail sales report will perhaps give some early clues into how the third-quarter GDP in Canada is shaping up to be.