Canada’s retail sales dropped a greater-than-expected 2% in April, with consumers cutting back on purchases in almost all areas, especially new cars, government figures showed.
Retail sales in the month were $36.2 billion, Statistics Canada said. Ten out of 11 subsectors recorded a drop, with only electronics and appliance sales posting a gain for the month, the data showed. Economists had forecast a decline in sales of about 0.4%.
Canada’s economy grew at its fastest pace in more than a decade in the first quarter, driven by strong domestic growth and the housing market. Economists say that pace is slowing down, although the country's economy is still the strongest among major industrialized nations.
“There have been some recent rumblings that Canada’s previously impressive domestic spending revival was losing steam, and the sharp drop in April retail sales is the loudest warning shot yet,” Doug Porter, deputy chief economist at BMO Capital Markets said in a note. “While the setback appears to be a simple case of a reversal of the weather-related jump in the prior month, the fact is that the days of easy gains are over for spending. “
The slowdown — coupled with an easing in inflation shown in data released Tuesday — may be good news for homeowners. The data will give the Bank of Canada space to pause after hiking interest rates as expected in July.
“Looking underneath the headlines, the decline in sales is big, broad and real,” HSBC economist Stewart Hall said of Wednesday’s retail data.
The figures were partly skewed by a particularly strong month in March, when retail sales rose more than 2.2% boosted by spending on the Easter holidays, unseasonably warm weather and residual Olympics fever.
In April, motor vehicle and parts sales declined 4.8%, with new car sales dropping 5.3%.
Sales of clothing and accessories were off 5.2%, while building materials supplies dropped 2%, StatsCan said. Food declined 0.5%, while gasoline was posted a 2% fall, it said.
All provinces saw a decline in retail sales in April, with Quebec posting the biggest drop of 3.9% after five consecutive monthly increases. The smallest drop was a 0.7% decrease in British Columbia, it said.
