Retail sales increased 1.0% to $73.7 billion in May. Sales were up in all nine subsectors, led by increases at gasoline stations and fuel vendors. Core retail sales, which exclude gasoline stations and fuel vendors and motor vehicle and parts dealers, were up 0.9% in May, reported Statistics Canada on Thursday.
In volume terms, retail sales increased 0.3% in May, added the federal agency.
Statistics Canada also provided an advance estimate of retail sales, which suggests that sales increased 0.4% in June.
“The largest increase in retail sales in May was observed at gasoline stations and fuel vendors (+3.1%). In volume terms, sales at gasoline stations and fuel vendors fell 2.7% in May,” it explained.
“Sales at motor vehicle and parts dealers were up 0.7% in May, rising for a second consecutive month. All four store types within this subsector posted increases in May, with higher sales at new car dealers (+0.5%) leading the gain.”
Following a decrease of 0.7% in April, core retail sales rose 0.9% in May. The increase was led by higher sales at general merchandise retailers (+1.0%), which posted its first increase in three months, said Statistics Canada.
“In May, higher sales were recorded at sporting goods, hobby, musical instrument, book, and miscellaneous retailers (+1.8%), also posting its first gain in three months,” it said.
“Sales at food and beverage retailers were up 0.5% in May. The increase in this subsector was led by higher sales at supermarkets and other grocery retailers (except convenience retailers), which rose 1.0% in May.”
On a seasonally adjusted basis, retail e-commerce sales decreased 1.5% to $5.0 billion in May, accounting for 6.8% of total retail trade, compared with 7.0% in April, it said.
“May delivered a solid month for retail sales, with core spending and real activity rebounding after two consecutive monthly declines. While Statistics Canada’s advance estimate points to slower nominal sales growth in June, last month’s fall in consumer prices suggests this mostly reflects a price effect and not weaker demand. Our internal TD Spend data reinforces that view, with services spending continuing to strengthen in June, supported by FIFA-related activity and recent federal government income support measures. Taken together, this points to a stronger outlook for real personal consumption growth in Q2 than currently embedded in our forecast,” said Maria Solovieva, Economist, TD.
“The durability of this experience remains an open question. Oil prices have resumed their climb this morning and, while they remain below the highs reached in April, they still represent an incremental tax on household purchasing power, particularly for lower-income consumers.”
Andrew Grantham, Senior Economist, CIBC Capital Markets, said Canadian retail sales volumes appear to have held up better than expected in the second quarter against the backdrop of high gasoline prices and no population growth.
“A modest rebound in May and potentially a stronger gain in June (as hinted at by the advance estimate), should offset earlier declines and leave goods consumption broadly flat relative to the first quarter. Looking ahead, enhanced household benefits were expected to support increased spending in the second half of the year, although the rebound seen recently in gasoline prices will at least partly offset that and start to restrict any pick up in discretionary spending,” he said.
“Overall retail sales volumes increased by 0.3% on the month, led by the rebound seen in core retail sales. Potentially linked to a modest upturn in housing market activity, retail sales volumes in furniture and building materials rose to their highest levels in six and three months respectively. Volumes of sales at gasoline stations fell on the month to partly offset increase in prices.
“The advance estimate for June pointed to a 0.4% increase in headline sales, which will likely look stronger in volume terms given the decline in gasoline prices seen that month. For Q2 as a whole, sales volumes appear to be little changed relative to the first quarter, which against the backdrop of the sharp rise in gasoline prices and no population growth is actually quite a positive result.”
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