Canada retail sales edge lower in June, May revised up

Canadian retail trade dipped 0.2 percent in June but May’s big jump was revised even higher, Statistics Canada said on Wednesday in a report that shed no light on the outlook for whether the Bank of Canada will hike rates as soon as September.

The see-saw retail sales data in May and June fed expectations for robust economic growth in the second quarter that should spur the central bank to hike rates in September or October.

Economists in a Reuters poll had predicted a 0.1 percent increase in retail sales from May and a 0.1 percent decline when autos are excluded. Excluding autos, sales were down 0.1 percent, as expected.

May’s gain was revised up to 2.2 percent from an initially reported 2.0 percent jump.

“Shoppers weren’t in much of a spending mood in June,” CIBC Capital Markets economist Royce Mendes wrote in a research note.

“The on-consensus reading will leave GDP still tracking flat for the month and roughly 3 percent for the quarter, and as result won’t do much to settle the debate between a September or October hike from the Bank of Canada,” he added.

Sales at gasoline stations fell 2.3 percent, partly reversing May’s 5.2 percent gain. In volume terms, sales at gasoline stations fell a milder 0.4 percent.

Motor vehicles and parts dealers saw sales decline 0.7 percent, the second drop in three months.

Sales were down in six of 11 subsectors, representing 52 percent of retail trade. Stripping out the effects of price changes, sales volume decreased 0.3 percent.

Canada’s economy has shown mixed signs of strength in recent months but financial markets widely expect the central bank to raise interest rates before year end after four hikes since July 2017.

Analysts are divided over whether a rate hike will happen in early September or late October as the bank gauges the impact of a trade dispute with the United States and how consumers and businesses are coping with the four hikes so far.

BMO Capital Markets Chief Economist Doug Porter said June’s pause in retail spending means the economy likely grew at about 3.3 percent annual rate in the second quarter.

“This isn’t that far from the BoC’s latest estimate of Q2 GDP growth of 2.8 percent, and keeps us leaning to an October rate hike,” Porter wrote in a note to clients.

The official tally of quarterly GDP is set for release on Aug. 30.