Canadian Retail Sales (August 2024)

Retail sales grow for the second consecutive month, supported by auto sales.

• Retail sales rose by 0.4% month-on-month (m/m) in August, coming in worse than Statistics Canada's advance estimate for a 0.5% m/m increase. July's print was unchanged at 0.9% m/m reported in the advance estimate. 
• Adjusting for inflation, the volume of retail sales was 0.4% higher on the month.
• Sales at motor vehicle and parts dealers rose by 3.5% m/m – the second consecutive month of growth. Ex-autos, sales were down 0.7% m/m, below the consensus expectation for growth of 0.4% m/m.
• Receipts at gas stations and fuel vendors fell 2.7% m/m in nominal terms, as gas prices declined thanks to lower oil prices. Still, in volume terms, receipts were down 2.2% m/m in August.
• Excluding auto sales and receipts at gas stations, core retail sales were down by 0.4% m/m in August.
  • The loss in core sales was led by food and beverage stores (-1.5% m/m) and furniture & electronics stores (-2.6% m/m). 
  • A few categories reported gains, but they weren’t strong enough to offset the contraction reported by biggest category declines.
• E-commerce sales declined by 2.5% m/m, erasing gains of the previous month.
• Statistics Canada's advanced estimate for September points to an increase of 0.4% m/m.

Key Implications

• Strong auto sales continued to drive retail growth in August. However, ex-autos, sales were the weakest in three months. Our internal credit and debit card spending data, which primarily reflects non-durable and durable goods, indicates a softening trend through September. Together, these signals align with our forecast, where a rebound in durable goods is expected to be the largest contributor to Q3 growth in total personal consumption expenditures - projected to rise at a below-trend rate of 1.0-1.5% quarter-on-quarter (annualized).
• Alongside the weakness in core sales, the downward trend in retail spending per capita remains intact, marking a major area of concern for the Bank of Canada, which moved to cut rates by 50 basis points this week. By accelerating its easing cycle, the Bank wants to see consumption growth strengthen, but it risks sparking more demand for housing instead. Financial markets are currently pricing in a coin-flip chance of another jumbo cut in December.    

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