Canada Retail Sales Research Brief

Retail sales inch up at slower than expected pace. Retail sales ticked up slightly in May, increasing 0.2 per cent month-over-month, which, after accounting for inflation, translated into a 0.1 per cent gain. While positive growth continued to suggest that households are absorbing higher borrowing costs better than expected, May’s reading was well below the preliminary estimate of 0.5 per cent. Retail sales were up only 0.5 per cent on an annual basis — the weakest showing since the onset of the global health crisis — which may suggest further easing ahead. The latest preliminary numbers imply that retail sales were unchanged in June. This calls into question the Bank of Canada’s claim that there is persistent excess demand in the economy. Consequently, an interest rate pause is becoming more likely as consumption continues to ease and headline inflation fell by more than expected in June. Commercial real estate investment activity may trend up over the coming months as a result.