Canada: retail sales up 0.7% in April, a decline likely for May

By Promit Mukherjee and Dale Smith

OTTAWA (Reuters) – Canadian retail sales rose 0.7% in April as expected, bucking a downward trend over the past three months as sales at the gas pump boosted the overall figures, according to data released Friday.

Retail sales, which include sales of motor vehicles, clothing, furniture, food and beverages, among others, reached 66.80 billion Canadian dollars ($48.78 billion) on a monthly basis, said Statistics Canada.

In terms of volume, overall sales increased by 0.5% in April.

For the month of May, a quick estimate from Statistics Canada, surveying only half of respondents for a preliminary estimate, showed that retail sales would likely decline by 0.6%.

In addition to sales at gas pumps, which rose 4.5% in their first increase this year, sales were also boosted by food and beverage retailers who saw an increase of 1.9%, according to the data.

Gasoline pumps and food and beverage retailers account for 10% and 19% of total retail sales, respectively.

The Canadian retail sector has been penalized since the start of the year by the highest interest rates in more than two decades, which has dampened consumer spending.

But economists predicted a rebound in sales in April due to rising gasoline and diesel prices, although pressure on consumers persists.

“Beyond monthly fluctuations, spending growth remained weak amid high interest rates and inflation,” Shelly Kaushik, an economist at BMO Capital Markets, wrote in a note.

“The coming quarters should indicate a recovery as rates begin to fall significantly,” she said.

On June 5, the Bank of Canada cut interest rates for the first time in four years by 25 basis points, to 4.75%, and money markets advanced their bets on a further cut to July, from from 71% to around 73% before the release of retail sales data. .

Consumer prices continued to fall in Canada and the next Consumer Price Index (CPI) data, expected next week, will help determine whether the estimated drop in retail sales in May is due to a falling volumes or prices, economists said.

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Core retail sales, which exclude sales at gas pumps and automobile vehicle and parts dealers, increased 1.4% in April. Sales increased in seven out of nine subsectors.

The largest decline in sales occurred at automobile vehicle and parts dealers, where they fell 2.2% in April. This subsector is the largest contributor and represents more than a quarter of total retail sales, according to Statistics Canada data.

($1 = 1.3694 Canadian dollars)

(Reporting by Promit Mukherjee and Dale Smith in Ottawa; editing by Matthew Lewis and Jan Harvey)