Canada Retail Sales To Slow

The monthly retail sales data due for release by Statistics Canada will be a dataset to watch. Following two months of gains and weak quarterly performance, investors will be looking to the data for April.

According to the median estimates of the forecasts, Canada’s retail sales are forecast to rise 1.0% on a month over month basis. This marks a slightly slower pace of increase from March’s 1.1% gain.

Retail sales excluding autos are forecast to rise by 0.9% in April. This is, again, lower compared to the 1.7% increase in March.

The data for March saw the retail sales closing the first quarter on a weak note. With the April data, investors will be looking to assess how the Canadian economy is faring. The Bank of Canada, in its monetary policy meeting, expressed hopes of a pick up in the economy during the second quarter of the year.

After Canada’s GDP fell 0.1% in February, the pick-up in March and April could potentially help to boost the economy. Under these circumstances, the retail sales report will garner attention.

Retail Sales Rebound 1.1% in March

The retail sales data for March saw consumer spending rising at retail outlets. Data from Statistics Canada showed that retail sales rose by 1.1% to $51.3 billion. In February, retail sales rose 1.0% which was revised up from 0.8% initially.

The gains in retail sales came on the back of higher sales at gas stations and building materials.

Garden equipment and supplies also helped to drive retail sales higher. The increase in March, which was on a monthly basis, beat the conservative estimates of a 1.0% increase.

Seven out of the eleven sub-sectors in retail sales were higher. However, it was retail sales at gas stations that outperformed. Sales at gas stations rose 6.0% in March.

This was due to higher fuel prices. However, on a volume basis, retail sales were practically unchanged, comparing to February.

Sales of building materials and garden equipment rose 4.3% during the month. Offsetting the gains was a decline in motor vehicle sales and parts dealers. Excluding auto sales, overall headline retail sales rose 1.7% on the month.

The data for March saw the Canadian economy rebounding following the slump in February.

The data for March, however, indicated the overall performance during Q1 would stay bleak. Nominal retail sales grew just 0.1%, while volumes fell 0.1% during the period. Overall, volumes rose just 0.3% on the month.

The gains in retail sales pointed to the possibility that momentum would be picking up into the second quarter of the year.

On a year over year basis, Canada’s retail sales grew 1.7% in the quarter ending March 2019. This was the weakest first quarter retail sales growth in over four years.

Will Canada’s Retail Sales Rise in April?

The Bank of Canada has kept interest rates unchanged for a number of reasons which includes weak domestic growth as well.

With oil prices falling surging in April, there is scope for the retail sales report to beat estimates once again.

However, on the flipside, the rising trade tensions could, however, dent consumer sentiment.

Retail sales could get a boost with the labor market data showing a rebound. Canada’s jobs report for April saw a rebound after declining in March. The economy added 106.5k jobs during the month as the unemployment rate fell to 5.7%.

Inflation was also tame, rising 0.4% on the month in April after rising 0.7% in the month before. An uptick in manufacturing sales during the period, which grew 2.1% raises the prospects of Canada’s retail sales beating estimates.

This will potentially bring some optimism to the economy as investors look to the data for the first month of the second quarter.