What does Canada’s retail sales data reflect about consumer spending?

May saw a 0.2% growth in Canadian retail sales, somewhat less than the predicted 0.5% gain. Retail sales only slightly increased in May and the forecast for June shows that the trend persisted.

This suggests that Canadian consumer spending was weak even before the Bank of Canada resumed its cycle of rate increases. Overall sales edged up by 0.1% in volume terms and were 1.3% higher year-over-year. However, this growth rate would still represent a decline in per capita terms.

Although overall GDP in Q2 is still close to the Bank of Canada MPR forecast, today’s data suggests that consumer spending likely wasn’t a significant driver of growth, even accounting for growth in services spending.

Industry data showing strength in manufacturing and wholesale suggests that inventory accumulation or business investment may be more significant contributors, which wouldn’t be bad news from an inflation point of view.