June retail sales a bright spot for Canadian economy: economists

OTTAWA — Canadian retail sales rose slightly in June and continue to be a bright spot in the economy.

Statistics Canada says in a report issued Tuesday that the retail sector’s growth was 1.1 per cent, excluding automotive and gasoline sales.

Economists at several banks say June’s retail sales suggest Canada’s overall gross domestic product was robust in the second quarter, but cautioned they expect the pace to slow.

Overall retail sales in June edged up 0.1 per cent to nearly $49 billion, while sales volumes were up 0.5 per cent after adjusting for price changes.

Sales at general merchandise stores rose 2.9 per cent in June to $5.8 billion, the fifth increase in six months.

There were also increases at clothing stores (up 3.3 per cent), while sales of building materials, garden equipment and supplies, (up 2.2 per cent) rose for the ninth time in 10 months.

Those gains were partially offset by declines at gas stations (down 1.8 per cent) and new car dealers (down two per cent).

E-commerce sales rose 43.5 per cent year-over-year on an unadjusted basis, a much faster pace than total retail sales, which rose 8.8 per cent on an annual, unadjusted basis. Still, e-commerce makes up just two per cent of total retail trade.

Statistics Canada issues its report on second-quarter GDP next week.

“Consumer spending in Canada continues to build on levels that already accounted for a record share of overall GDP last year,” Nathan Janzen wrote in a note to clients from RBC Economics.

“GDP still looks on track to rise 3.7 per cent (annualized) in Q2 as a whole, in line with the Q1 increase. That outsized pace isn’t likely to be sustained and significant risks around NAFTA renegotiation remain.”

TD economist Dina Ignjatovic said the bank expects consumer spending will continue to grow but at a more moderate pace forward.

“The cooling housing market — particularly in Ontario — is likely to weigh on demand, especially for housing related goods. Meanwhile, rising interest rates should help to rein in household spending more broadly.”

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