Retail Sales Unexpectedly Drop on Lower Food & Booze
(Bloomberg) -- Canadians retailers reported an unexpected decline in sales as consumers cut back on purchases of groceries, alcohol and clothing.
Sales fell 0.1% in May, Statistics Canada said Friday from Ottawa, versus economist expectations for a 0.3% increase. Excluding motor vehicles and gasoline, the drop was even more pronounced, at 1%.
The report runs against the broader narrative of a rebounding Canadian economy, and is an arrow in the quiver for those who believe the central bank will eventually need to follow the U.S. Federal Reserve in lowering interest rates.
Canada’s currency extended declines after the report, with the loonie dropping 0.5% to C$1.3096 against its U.S. counterpart at 8:33 a.m. Toronto time.
- Friday’s retail sales data may heighten concern about the degree to which debt service costs, which are close to the highest since the financial crisis, are eating into disposable income, and call into question how much Canada can continue to rely on consumers to fuel new economic growth.
- In volume terms, which strip out the effects of price changes, sales were down 0.5% on the month and 1% on the year.
- Tempering the negativity, retail sales rose in the three most-populous cities -- Toronto, Montreal and Vancouver. The statistics agency also noted its “trading-day adjustment,” where it accounts for the number of heavier shopping days in a calendar month, may have skewed the May results to the downside. In addition, record rainfall in Ontario and Quebec were likely a factor.
- Sales of food at supermarkets fell 2% on the month, while receipts at beer, wine and liquor stores declined 2.7%. Clothing sales fell 2.7%, and the general merchandise sector was down 1.1%.
- Retail sales fell in every province except Ontario and Quebec, echoing the story in housing markets, where a recovery is underway in the eastern part of the country, while the western part remains subdued.
- April’s meagre advance in retail sales was revised slightly higher to 0.2%, from 0.1%; excluding autos, it was revised a tick lower, to flat, from 0.1%.
©2019 Bloomberg L.P.