Canada retail sales jump in June, but seen falling in July

FILE PHOTO: People walk past a Shoppers Drug Mart store in Toronto

By Julie Gordon

OTTAWA (Reuters) – Canadian retail sales surged 4.2% in June from May, led by a strong rebound in demand for clothing and accessories, while July retail sales likely fell 1.7%, data showed on Friday.

The June gain was slightly below the average analyst estimate of 4.4%, Statistics Canada data showed. Excluding motor vehicles and parts, retail sales were up 4.7%, just beating expectations of 4.6%.

Sales increased in eight of 11 subsectors, representing 69.5% of retail trade, as COVID-19 restrictions were eased and Canadians flocked back to nonessential stores, Statscan said.

“There’s nothing like some retail therapy to cure the post-lockdown blues,” Royce Mendes, senior economist at CIBC Capital Markets, said in a note to clients.

“The general rebound following lockdowns shows the willingness of Canadians to spend and, more broadly, how quickly the economy can bounce back when Covid cases are low,” he added.

While the preliminary estimate for July was disappointing, economists noted that even with the decline, retail sales remain well above their pre-COVID-19 levels. The drop in July could also signal a shift to more spending in bars and restaurants.

“It’s very possible that spending was redirected to services as that sector more fully reopened,” said Benjamin Reitzes, Canadian rates and macro strategist at BMO Capital Markets.

Canadian provinces eased restrictions through the spring as new COVID-19 cases fell amid a successful inoculation campaign. But a Delta variant-driven rebound of COVID-19 cases is starting to cloud the outlook.

Clothing and accessory sales spiked 49.1% in June, with sporting good sales up 27.9% and home goods up 23.2%. Sales of new cars rose by 3.3% and used cars jumped 3.0%.

($1 = $1.0000)

(Reporting by Julie Gordon; editing by Jonathan Oatis)