Randy Thanthong-Knight
Wed, June 21, 2023
(Bloomberg) -- Canadian consumers showed little sign of slowing down, with stronger-than-expected spending at the beginning of the second quarter seen holding firm in May.
Receipts for retailers rose 0.5% last month, according to an advance estimate from Statistics Canada. That followed a 1.1% jump a month earlier, which beat the 0.4% median estimate from economists in a Bloomberg survey. In volume terms, retail sales increased 0.3% in April.
Core retail sales, which exclude gasoline stations and car dealers, increased 1.5%, the fifth consecutive monthly increase. The gain was led by higher sales at general merchandise stores and food and beverage retailers.
The data suggest Canadian consumers were still dining out, traveling and spending on major purchases such as cars. Their resilience defied expectations that the country’s deeply indebted households would respond more quickly and negatively to an aggressive hike campaign of interest-rate hikes by the Bank of Canada.
Strong economic momentum since the central bank declared a pause in January prompted policymakers to raise the benchmark overnight rate again to 4.75% earlier this month. The move upended markets, and swaps traders are ramping up bets on another hike at the bank’s next meeting on July 12.
“Coming off a strong first quarter of consumer spending, a second consecutive monthly move higher is not what the Bank of Canada will be looking for as it hopes to slow domestic demand,” Randall Bartlett, senior director of Canadian economics at Desjardins Securities, said in a report to investors.
Regionally, sales rose in eight provinces in April, with Ontario seeing the largest increase of 1.3%, led by higher vehicle sales.
The statistics agency didn’t provide details on the May estimate, which was based on responses from 40.6% of companies surveyed.
--With assistance from Erik Hertzberg.
(Updates with economist reaction.)
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