Canadian retail sales rose 0.7% m/m in March, following a healthy (downwardly revised) increase of 1.5% in February. Today's reading came in above market expectations which had called for a 0.3% increase.
Today's retail report brings the first quarter of 2015 to a close, with retail volumes down 1.6% annualized from last quarter. This reading provides little support to GDP and reinforces the view that the Canadian economy likely saw very little growth in Q1. This is in line with the view expressed by the Bank of Canada in its most recent Monetary Policy Report.
"While considerable uncertainty remains as to how oil prices will evolve, it is likely to continue recovering gradually over the remainder of the year but to remain at low levels. On this premise we forecast that the price of gasoline is likely to rise gradually, although consumers are still likely to save substantially at the pumps in 2015 compared to 2014." says TD Economics
Meanwhile, the pass-through effects of a past depreciation in the loonie are likely to put upward pressure on the prices of imported goods, and thus erode roughly all of these savings.
"Factoring in the hit from lower crude oil prices on incomes, we forecast that retail sales growth is likely to decelerate significantly this year to under 3% (y/y) from 4.6% last year." adds TD Economics
