Canada Retail Sales to Slow on Weaker Gas Prices
Statistics Canada will be releasing the monthly retail sales report. This will be one of the last few economic reports that will feed into the Q3 GDP.
Canada will be officially releasing the final third-quarter GDP estimate in a week’s time.
Currently, Q3 GDP estimates are around 1.8%.
A slightly higher retail sales report could potentially see this figure being revised higher. However, given the weaker gas prices during the month, the forecasts remain to the downside.
Economists forecast that Canada’s retail sales will rise at the same pace of 0.4% as it did in July.
The increase in the previous month was the first one in three months. In the second quarter, Canada’s retail sales rose 1.5% on a not seasonally adjusted basis. After excluding price impacts, volumes were flat during the period.
The second-quarter retail sales were down from 1.8% in the first three months of the year.
On an annual basis, Canada’s retail sales are up just 0.9% on the three months ending July.
Excluding auto sales, core retail sales are, however, expected to fall by 0.3%. This comes on the back of a 0.1% decline previously.
However, there is a possibility that core retail sales will rise. Auto sales in Canada during August edged up slightly higher. Auto sales rose 2.4% on a month over month basis. This was after the sector saw a decline in the previous two months.
The retail sales report also comes about a week ahead of the next Bank of Canada monetary policy meeting. So far, various indicators suggest that the Canadian economy is still in a good place.
This could mean that the BoC will likely keep rates unchanged.
Employment and Wage Growth Increases
The flat volume sales come despite a pickup in employment and wages. Employment inched higher by 2% compared to a year ago. Canada’s wage growth is also well above the inflation rate.
This puts more purchasing power in the hands of consumers. It isn’t surprising, therefore, to see that household spending is slated to rise.
The monthly labor market data showed another month of strong performance. This came on the back of the data for August. Economists initially forecast that employment would slow, or pullback after the August performance.
But this wasn’t the case. Canada’s unemployment rate fell by 0.2 percentage points. Wage growth is seen running higher at 4%.
Together, the labor market continues to point to the potential for an increase in consumer spending.
This is further bolstered by the fact that the BOC has kept interest rates steady for quite a while. Forward-looking indicators show that the BoC could head into the end of the year without any rate cuts.
This would mark a strong stance in the midst of a slowing global economic growth.
Higher Factory Sales in August to Offset Gas Prices
In August, factory sales also saw a healthy rebound. For the month, factory sales rose by 0.8%.
This was the first increase in three months with gains coming on the back of motor vehicle assembly plants.
Factory sales fell 1.5% and 1.3% in the previous months of June and July respectively.
But the increase in auto sales will be offset by gas prices. In August, Canada’s gas prices fell 10.2% and come on the back of a 6.9% decline in the month before.
Today’s retail sales figures will not see an impact on the final GDP estimates for the third quarter in Canada. The odds of a disappointing print on the retail sales remain slim at the moment.