Canadian consumers haven’t tightened their belts this much in nearly a year, and there are no signs of spending growth since the start of 2024.
Receipts for retailers were unchanged in March, according to an advance estimate from Statistics Canada released Wednesday. That followed a 0.1 per cent drop in February, missing expectations for a 0.1 per cent gain in a Bloomberg survey.
Taken together with the 0.3 per cent plunge in January sales, the figures point to a flat reading in the first three months of the year, the weakest pace since the second quarter of 2023.
After the release, yields on two-year Canadian government bonds fell about three basis points to 4.25 per cent, while the loonie weakened about 0.3 per cent to $1.372 per U.S. dollar as of 9:08 a.m. Ottawa time.
February’s decline was led by lower sales at gas stations, while car sales rose. Excluding these two subsectors, core retail sales were unchanged. All in, the report shows consumers cutting back on discretionary products including clothing and accessories as well as sporting goods.
In volume terms, retail sales decreased 0.3 per cent in February. Excluding autos, retail sales fell 0.3 per cent, lower than expectations for a 0.1 per cent increase, while the previous month’s growth was revised down to 0.4 per cent.
February’s decline was more widespread than weakness seen in January, underscoring the challenges facing consumers amid rising costs of living and financing, Maria Solovieva, economist at Toronto Dominion Bank, said in an email.
“Despite the overall softness, auto sales emerged as a bright spot, demonstrating their usual roly-poly resilience by bouncing from previous declines,” she said, adding that the bank’s internal data points to solid spending in March.
Tiago Figueiredo, macro strategist at Desjardins Financial Group, said he expects retail sales to struggle given the mortgage renewal cycle, slowing population growth and rising business insolvencies, which are pushing the unemployment rate higher.
The data reinforces that a Bank of Canada interest-rate cut is likely at the next meeting in June, Olivia Cross of Capital Economics said in a report to investors.
Regionally, sales were down in seven provinces in February, with the largest declines in Alberta, led by lower car sales. Canada’s two most populous provinces — Ontario and Quebec — as well as its three biggest cities — Toronto, Montreal and Vancouver — all saw receipts for retailers decrease.
The statistics agency didn’t provide details on the March estimate, which was based on responses from 61.9 per cent of companies surveyed. The average final response rate to the survey over the previous 12 months was 90.7 per cent.
February’s retail sales growth fell below the range of estimates in the Bloomberg survey, which spanned 0.0 per cent to 0.8 per cent.
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