Retail sales rose 1.1% month-on-month (m/m) in April, much stronger than the Statistics Canada’s advanced estimate of 0.2% and consensus forecast of 0.4%. March’s print was revised down to -1.5% m/m from an originally reported loss of 1.4%.
Adjusting for the impact of inflation, the volume of retail sales was 0.3% higher on the month.
Sales at motor vehicle and parts dealers (+0.5% m/m) recovered some of the losses reported in March, while gasoline stations and fuel vendors registered a 0.3% m/m gain after two months of sizeable declines.
Excluding these volatile categories, core retail sales were 1.5% m/m higher in April, above the consensus estimates of 1.3% m/m.
The gain in core sales was led by higher sales at general merchandise retailers (+3.3% m/m) and food and beverage retailers (+1.5% m/m), which together accounted for more than 60% of April’s jump. Sales were also strong at clothing and clothing accessories stores (+3.1%) m/m, health and personal care retailers (+1.0% m/m), sporting goods, hobby items, musical instruments and books stores (+1.0%), and building material and garden equipment and supplies dealers (+0.7% m/m).
Home furnishings stores (-1.8% m/m), electronics and appliance stores (-1.3% m/m) and miscellaneous retailers (-0.5% m/m) were in the red in April, but their losses only took one tenth of a percentage point off of today’s strong headline reading.
E-commerce sales, which are not included in the headline tally, declined by 6.1% m/m after three months of strong growth.
Statistics Canada’s advanced estimate for May indicates a 0.5% m/m gain – slightly stronger than our internal card spending data (which excludes auto sales and tilts toward housing-related categories).
Key Implications
Retail sales entered the second quarter beating expectations with growth powered not only by insatiable demand for cars but also by strong gains in core categories – revealing a reacceleration in spending momentum. This results in a stronger handoff to the second quarter with real consumer spending now tracking 1.0% quarter-on-quarter (annualized).
Such broad based growth vindicates the Bank of Canada’s decision to raise its policy rate. Amid its continuous effort to stymie persistent excess demand, and stop the decline in inflation from stalling, the Bank is likely to hike again in July. Markets agree, and are pricing the probability of a July hike at more than 60%.
