Sales by Canadian retailers fell 0.1% in May

Canadian retail sales declined in May for the first time in four months as consumers spent less on supermarkets and liquor stores.
The value of retailers’ sales declined 0.1% in May to $ 51.5 billion, Statistics Canada reported on Friday.

Economists expected a 0.3% increase in sales, according to forecasts by Thomson Reuters Eikon.

Royce Mendes, Senior Economist for CIBC, pointed out that the weakness was based on a relatively narrow base, with only four of the eleven sectors recovering over the month.

“Food and beverage stores have been the odd drop, which is odd for a sequence that would normally be relatively consistent,” Mendes said in a report.

“As a result, some of this weakness may be transitory, but in a longer-term perspective, real sales have been steadily growing since the beginning of 2017.”

Grocery store receipts declined 2.0% in May after three consecutive months of gains, while grocery and other grocery stores declined 2.0% and beer, wine and convenience store spirits fell by 2.7%.

Clothing and clothing accessories stores reported a 2.7% drop in sales while general merchandise stores lost 1.1%.

At the same time, sales of motor vehicle dealers and their parts rose 0.5% and those of cannabis stores 14.8%.

Excluding sales at motor vehicle and parts dealers and service stations, retail sales decreased 1.0%.

Expressed in volume terms, retail sales declined 0.5% in May.

Benjamin Reitzes, who specializes in Canadian rates and macroeconomics at BMO Capital Markets, said several factors may have weighed on retail sales.

“First, gas prices have risen sharply this month, pushing service station sales up 3.5%. These expenses tend to be diverted from other sectors, “he explained.

“And the May climate was simply horrible, a generally negative factor for the retail business. The hardest hit sectors, such as clothing, sporting goods, alcohol and general merchandise stores, are compatible with bad weather. ”

Reitzes, however, noted that Canadians remain heavily indebted, which will likely limit spending growth for years to come.

The lower-than-expected retail sales report was released as the Canadian economy shows signs of strength, rebounding after a difficult period in late 2018 and early 2019.

The Bank of Canada kept its key rate unchanged last week, also releasing an update of its Monetary Policy Report.

In its forecast, the central bank raised its growth outlook for the second quarter to an annual rate of 2.3% from its April forecast of 1.3%. She also predicted annual growth of 1.5% for the third quarter.

The Bank of Canada’s position differs from that of the US Federal Reserve, which is expected to lower its key interest rate later this summer.

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