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Canadian Retail Sales (June 2024)

Maria Solovieva, CFA, Economist | 416-380-1195 

Date Published: August 23, 2024

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Retail sales contracted for the second consecutive month

  • Retail sales declined by 0.3% month-on-month (m/m) in June, continuing the downward trend after a contraction of 0.8% m/m in May. This was in line with the Statistics Canada's advanced estimate.
  • Adjusting for the impact of inflation, the volume of retail sales was down 0.1% m/m in June.
  • Sales at motor vehicle and parts dealers dropped by 2.1% m/m, following a remarkable 3.2% m/m surge in May. The decline is attributed to a series of cyberattacks on a key software provider used by up to 15,000 retail auto dealers across North America. Excluding autos, retail sales grew by 0.3% - higher than the consensus estimate of a 0.2% m/m decline.
  • Receipts at gas stations and fuel vendors fell 0.5% m/m in nominal terms, but gained 2.6% m/m in volumes terms.
  • Excluding auto sales and receipts at gas stations, core retail sales were up by 0.4% m/m in June. Additionally, May's loss was revised  to a marginally higher reading of -1.3% m/m from -1.4% m/m, reported originally.
    • The gain in core sales was led by food and beverage stores (+1.2% m/m) and clothing and clothing accessories stores (+1.0% m/m). Both of these categories were in the red last month. 
    • The rest of the retailer categories made either small or negative contributions to today's reading. 
  • E-commerce sales were weaker on the month, contracting by 2.4% m/m following a contraction of 4.0% m/m in May.
  • Statistics Canada's advanced estimate for July points to a rebound in sales of 0.6% m/m.

Key Implications

  • Consumers continued to tighten their spending in June, building on the significant contraction in May. As a result, Q2 retail sales posted a weak overall performance, declining by 1.8% quarter-on-quarter (q/q, annualized) in nominal terms, from the 1.9% growth observed in Q1. This ongoing weakness in retail sales will weigh on real personal consumption expenditure, which will have to rely heavily on services spending to support any growth in Q2, currently forecasted at 1.0% q/q (annualized).
  • Looking ahead, to the third quarter, signals are mixed. Our internal data suggests July spending remained weak, aligning with soft employment figures, but differing from Statistics Canada’s flash estimate. However, we anticipate a rebound in auto sales as transactions delayed by the tech outages are processed.
  • Adding to the uncertainty is the situation involving Canadian National Railway (CN) and Canadian Pacific Kansas City (CPKC). Although the federal government has ordered the railways to resume operations, the union may challenge the constitutionality of this intervention in court. As a result, the railways’ operational status remains uncertain. If the strike extends for weeks rather than days, it could have significant economic and logistical consequences for the goods sector. Auto and grocery retailers, in particular, are likely to experience inventory disruptions.               

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