Canada (Commonwealth) _ The Bank of Canada’s argument to keep lowering rates is supported by the fact that although retail sales in Canada probably increased this month after declining in June, the gains won’t make up for a terrible first half of the year.
The second monthly sales rise of the year occurred in July, with merchants’ receipts up by 0.6%, as per an advance estimate provided on Friday by Statistics Canada. That came after a 0.3% decrease the month before, which was in line with forecasts from an economist poll conducted by Bloomberg.
After declining by 0.4% in the first quarter, overall sales decreased by 0.5% in the second quarter. The numbers indicate that, except from the pandemic, they are the lowest two straight quarters since 2009, which keeps the central bank on pace to reduce borrowing costs on September 4 for a third consecutive meet.
In June, sales declined in four out of nine subsectors, with car dealership sales declines leading the way. Reduced sales of new automobiles, a very variable sector this year, were the main cause of the fall. Previously, as the nation recovered from the epidemic, pent-up demand and a growing population supported car sales growth.
After a hacker gang breached CDK Global, a company that produces software that dealerships use extensively, auto sellers experienced varying degrees of disruption to their business for over two weeks. After learning of the intrusion on June 19, CDK Global turned off its systems. The business subsequently stated that it anticipated having its clients back online by July 4.
According to Maria Solovieva, an analyst at Toronto-Dominion Bank, vehicle sales are expected to increase after the transactions that were postponed due to the June IT failure are completed. Nevertheless, she added that after a notable contraction in May, consumers kept tightening their belts in June.
According to Solovieva, the first month of the third quarter isn’t exhibiting any signs of recovery. “According to our internal data, spending in July remained weak, in line with Statistics Canada’s flash estimate and soft employment.”
July’s sales growth of 0.6% would be the most since December. The Bank of Canada lowered its policy rate to 4.5% in June and July, coinciding with the apparent retail resurgence. Markets and economists generally anticipate that the central bank will keep cutting next month as inflation continues to decline and attention is diverted to a worsening labor market.
“Details of the retail report do not show consumers suffering from restrictive monetary policy,” stated Stuart Paul, an economist for the US and Canada. June saw increases in spending in several of the most interest-sensitive sectors, with a cyberattack on car dealers possibly acting as the main drag on headline expenditure.
Motor vehicle and parts retailers saw the worst decline in retail sales in June (-2.1%). Lower sales at new automobile dealers (-2.9%) and used car dealers (-0.6%) were the main causes of the decline. Other motor vehicles saw the most gain in the subsector of motor vehicles and parts dealers. In June, sales at fuel vendors and petrol stations decreased by 0.5%. Sales at fuel vendors and petrol stations climbed 2.6% in terms of volume.
Core retail sales increased by 0.4% in June after declining by 1.3% in May due to increases in food and beverage retailers’ sales (+1.2%), which were driven mostly by supermarkets and other grocery retailers (apart from convenience stores) (+1.8%). Reduced sales at convenience stores and vending machine operators (-1.9%) offset gains at specialty food and beer, wine, and liquor merchants (+0.4%) and specialty food retailers (+0.5%).
The merchants of sporting goods, hobbies, musical instruments, books, and other items saw the worst decline in core retail sales in June (-0.8%).
In June, retail sales fell in seven provinces. Ontario saw the biggest provincial decline (-0.4%), driven mostly by decreased sales at auto and parts dealers. Sales in the Toronto census metropolitan region increased by 0.3%.
June saw a 2.2% decline in retail sales in Manitoba, mostly due to a decline in sales at auto and parts retailers. In June, Newfoundland and Labrador saw the biggest provincial rise in retail sales (+0.2%). The primary driver of this growth was an increase in sales at gas stations and fuel suppliers.
