Retail on hot streak amid consumption boom: report
Spending appetite continues to grow as households binged on cheap credit
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.
Canada has been in a consumption boom for years, as households binged on cheap credit. The appetite for spending has increased over the past six months as the country emerged from the drop in commodity prices and the jobless rate fell to the lowest since 2008.
It’s a remarkable run in spending that policy-makers expect will continue, even as the Bank of Canada raises interest rates. Households will account for about two-thirds of growth over the next three years, the central bank projected last month. That would extend a pattern over the past 15 years that has seen consumers carry the bulk of the economic load.
“The retail sector continues to look strong,” Andrew Grantham, an economist at CIBC World Markets, said in a note to investors.
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.
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.”