Canada April retail sales up 0.7%, a drop likely for May By Reuters

By Promit Mukherjee and Dale Smith

OTTAWA (Reuters) -Canada’s retail sales expanded by 0.7% in April as expected, bucking a trend of decline in the last three months, as sales at gasoline pumps boosted the overall numbers, data showed on Friday.

Retail sales, which comprise sales of motor vehicles, clothing, furniture, food and beverages among others, grew to C$66.80 billion ($48.78 billion) on a monthly basis, Statistics Canada said.

In volume terms, overall sales increased 0.5% in April.

For May, a flash estimate by Statscan surveying only half of the respondents for a preliminary estimate showed that retail sales would likely drop by 0.6%.

Apart from sales at gasoline pumps, which rose by 4.5% in their first increase this year, sales were also bumped up by food and beverage retailers who clocked an increase of 1.9%, data showed.

Gasoline pumps and food and beverage retailers account for 10% and 19%, respectively, of total retail sales.

Canada’s retail sector had been crimped since the start of the year by the highest interest rates in more than two decades, which have dented consumer spending.

But economists had forecast sales would rebound in April due to higher prices of gasoline and diesel fuel, even as consumer strain continues.

„Looking past the monthly swings, spending growth has remained soft amid elevated interest rates and inflation,” Shelly Kaushik, an economist at BMO Capital Markets, wrote in a note.

„The coming quarters should point to a recovery as rates start moving meaningfully lower,” she said.

The Bank of Canada on June 5 cut interest rates for the first time in four years by 25 basis points to 4.75%, and money markets advanced their bets for another cut in July to roughly 73% from 71% before the retail sales data was published.

Consumer prices have continued to ease in Canada and the next consumer price index (CPI) data, due next week, will give clarity on whether the estimated drop in retail sales in May is due to lower volumes or prices, economists said.

Core retail sales, which exclude sales at petrol pumps and motor vehicle and parts dealers, were up 1.4% in April. Sales were up in seven out of nine subsectors.

The largest decline in sales came from motor vehicle and parts dealers, where they dropped by 2.2% in April. This subsector is the biggest contributor and accounts for over a quarter of total retail sales, Statscan data showed.

($1 = 1.3694 Canadian dollars)