Canada Retail Sales Research Brief

Retail sales stagnate as higher interest rates are slowly absorbed. In June, retail sales grew 0.1 per cent month-over-month. Robust population growth, coupled with a relatively healthy labour market and elevated savings, has helped the economy absorb rising borrowing costs better than expected. However, the underlying data continues to point to further weakness ahead. After adjusting for inflation, retail sales edged down 0.2 per cent month-over-month in June. Core retail sales — which exclude gasoline, as well as motor vehicle and parts dealers — were down 0.9 per cent. While a slowdown in consumption will likely cause economic growth to soften, it indicates that the Bank of Canada’s interest rate hiking cycle is beginning to impact the broader economy. This may be enough to force the Central Bank back to the sidelines at its September meeting as underlying inflationary pressures continue to ease.