Retail sales fell 0.3% to $65.7 billion in June. Sales fell in four of the nine sub-sectors, led by declines in auto and parts dealers..
Core retail sales — which excludes petrol stations, fuel vendors and car and parts dealers — rose 0.4% in June. In terms of volume, retail sales increased by 0.1% in June.
Retail sales fell 0.5% in the second quarter. In terms of volume, quarterly sales decreased by 0.3%.
Decline in sales in car and parts dealers The largest decline in retail sales was observed in June in car and parts dealers (-2.1%). The decline was driven by lower sales at new car dealers (-2.9%), followed by used car dealers (-0.6%). The largest increase in the automotive and parts dealers sector came from other car dealers (+2.5%).
Sales at petrol stations and fuel vendors fell (-0.5%) in June. In terms of volume, sales at petrol stations and fuel vendors increased by 2.6 percent.%.
Rising core retail sales
After a 1.3% decline in May, core retail sales rose 0.4% in June due to higher sales at food and beverage retailers (+1.2%), led by gains in supermarkets and other grocery retailers (excluding essential retailers) (+1.8%). Gains in retailers of beer, wine and alcoholic beverages (+0.4%) and specialty food retailers (+0.5%) were offset by lower sales at essential goods retailers and vending machine operators (-1.9%).
The biggest decline in core retail sales in June came from retailers of sporting goods, hobbies, musical instruments, books and miscellaneous (-0.8%).
Retail sales fell in seven counties in June. The largest regional decline was observed in Ontario (-0.4%), led by lower sales at auto and parts dealers. In the Toronto Metropolitan Census Area, sales rose 0.3%.
Factors affecting CAD retail sales data
There are many factors that may affect the Canadian dollar (CAD) retail sales data for a given month. Here are some of the key factors that may affect CAD retail sales figures:
Consumer confidence: Consumer confidence plays an important role in driving retail sales. If consumers are optimistic about the economy, business prospects, and their own financial situation, they are more likely to spend. Conversely, if confidence is low, consumers may reduce discretionary spending.
Employment levels: The employment situation in Canada is critical to retail sales. High levels of employment and wage growth typically lead to increased consumer spending, positively impacting retail sales. Conversely, high unemployment or stagnant wages can discourage consumer confidence and spending.
Income levels: Disposable income levels directly affect consumer spending patterns. Higher incomes often translate into increased spending on goods and services, while lower incomes may lead to more cautious spending habits.
Interest rates: Interest rates set by the Canada Bank can affect borrowing costs for consumers. Low interest rates can stimulate borrowing and spending, which can boost retail sales. On the other hand, higher interest rates may deter borrowing and slow spending.
Inflation: Inflation affects the purchasing power of consumers. High inflation can erode real incomes, leading to lower spending. Conversely, moderate inflation can encourage spending as consumers may seek to make purchases before prices rise further.
By looking at these key factors that influence retail sales data in Canada, analysts and policymakers can better understand and anticipate changes in consumer spending patterns, providing valuable insights into the overall health of the Canadian economy.
Retail sales correlation with GDP growth
Retail sales and GDP growth are closely linked, and changes in retail sales can point to broader economic trends. Here’s how these two factors relate in the context of the Canadian economy:
Consumer Expenditure Index:
Retail sales reflect consumer spending on goods and services. Since consumer spending typically accounts for a large portion of GDP (about 55-60% in Canada), changes in retail sales can provide insights into overall consumption patterns and, consequently, GDP growth.
Impact on economic growth:
Strong retail sales figures often point to strong consumer demand, which can drive economic growth. When consumers spend more on retail goods, it can lead to increased production, job creation and overall economic expansion, contributing positively to GDP growth.
Consumer Confidence:
Retail sales data can affect consumer confidence. Higher retail sales figures could boost consumer sentiment, leading to increased spending and possibly driving GDP growth. On the other hand, weak retail sales may indicate lower consumer confidence, affecting overall economic activity.
Cyclical nature:
Retail sales tend to be cyclical, volatile with economic conditions. During periods of economic expansion, retail sales typically increase as consumers feel more confident about their financial situation. Conversely, during economic downturns, retail sales may decline as consumers reduce discretionary spending.
Investment Decisions:
Retail sales data can influence business investment decisions. Strong retail sales figures may encourage companies to increase production and invest in expanding their operations to meet consumer demand, contributing to GDP growth.
In short, the relationship between retail sales and GDP growth in Canada is important and interrelated. Retail sales data serves as a key indicator of consumer behavior and spending patterns, providing valuable insights into the health of the economy and its potential impact on GDP growth.
