Canadian retail sales fall sequentially in June, GDP likely to have grown 3.5 pct in Q2

Canada’s retail sales dropped in June. On a sequential basis, Canadian retail sales fell 0.2 percent in the month, following a strong report of May that recorded an upwardly revised growth of 2.2 percent. The June data saw lower volumes, with constant-dollar sales down 0.3 percent. Sales of auto and gasoline mainly led to the June fall, dropping 0.7 percent and 2.3 percent, respectively. Stripping these categories, retail sales rose 0.3 percent.

Food and beverage stores recorded strong growth of 0.9 percent, while building material/garden equipment stores saw a rise of 1.1 percent. E-commerce sales continues to outperform, rising 18 percent, well ahead of the 3.9 percent pace of retail sales overall. Online sales accounted for 2.6 cents of every retail dollar spent last month, noted TD Economics in a research report.

Region wise, Ontario saw a rise of 0.7 percent; however, this was countered by falls in Quebec, B.C., and Alberta.

Retail sales were expected to take a breather following the prior month’s strong gain. Despite the fall in June sales, retail sales are expected to record a respectable rise of 3.6 percent in volumes for the whole quarter, stated TD Economics in a research report.

However, from a longer-term perspective, retail spending continues struggling to get out of its rut. Rising incomes are likely to underpin the sector; however, rising debt service costs might continue to be a headwind, limiting the upside to growth.

“We expect Statistics Canada to report Q2 real GDP growth of about 3.5 percent q/q annualized next week. With the economy performing well and core inflation measures solidly on target, the pieces are in place for another Bank of Canada policy interest rate hike this fall”, added TD Economics.

At 13:00 GMT the FxWirePro's Hourly Strength Index of Canadian Dollar was highly bullish at -53.3031, while the FxWirePro's Hourly Strength Index of US Dollar was slightly bearish at -105.406. For more details on FxWirePro's Currency Strength Index, visit http://www.fxwirepro.com/currencyindex