Fears Of Weakness In Q1 Consumer Spending In Canada
Declining retails sales in Canada over the last several months have reinforced worries about weaker consumer spending and the Canadian economy slowing down. Indeed, Canada’s real GDP is expected to record less that 1.5% growth in the first quarter, making for two consecutive quarters where growth has undershot potential. Therefore, the central bank is expected to continue to pause on rate hikes at its April 24th meeting.
Retail sales in Canada rebounded higher in February both in in real volume terms as well as in nominal terms. The monthly rebound was due to higher gasoline prices and a rather large increase in general merchandise sales.
We should expect further gasoline price hikes to lift sales in March. In February, sales improved in 5 of the 11 broad categories, including motor vehicles/parts (+1.4%), gasoline stations (+1.9%) and general merchandise store (+3.8%).
Despite the solid gain in sales in February, the overall retail pictures remain subdued due to the slowing housing market, higher interest rates and the elevated debt burden facing Canadian consumers.