Retail sales rose slightly in June, but this 0.1% increase hides a sizeable decline in core sales that even affects food, wine and beer.
The increase in June was mainly due to increased sales of cars and gasoline, the price of which rose. Excluding cars and gasoline, core retail sales are down 0.9%, their biggest decline since December 2021, said National Bank economist Kyle Dahms.
Retail sales are down in almost all sectors, according to Statistics Canada, including, a sign that times are tough, in supermarkets and grocery stores where the decline reached 0.4%. Among beer and wine retailers, sales even fell by 2.4%.
Consumers also shied away from furniture, electronics and appliance stores. Sales of electronics and home appliances are at their lowest level in more than two years.
Even if the June figures seem to indicate that consumers are still hanging on, they are starting to suffer from inflation and rising interest rates, said Maëlle Boulais-PRésault, economist at Desjardins.
Retail sales increased in June in four of the ten Canadian provinces, including Ontario and Quebec. For Ontario, this is explained by the strength of the automotive sector, and for Quebec, it is higher inflation that inflates the figures, explains the Desjardins economist.
While dollar retail sales rose 0.1% in June, they are down 0.2% in volume.
The June figures end an anemic second quarter for retail sales. In volume, retail sales were down 0.8%, while unchanged from the first quarter.
The weakness of retail sales is even more evident if we take into account the strong demographic growth, which supports several economic sectors, note the economists of the National Bank and Desjardins.
“The Bank of Canada should therefore be reassured that its tightening measures are working as intended,” said Maëlle Boulais-PRésault.
The Bank of Canada raised its policy rate by 25 basis points to 5% in July. This tenth hike could be the last if the economy continues to show signs of weakness.
The central bank’s next interest rate decision is scheduled for September 6.