Canada’s retail sales slump as high rates weigh on shoppers

Canadian consumers likely continued to tighten their belts in June after a sharp spending pullback in May, marking a weak first half of the year for retail sales in the country.

Receipts for retailers fell 0.3% in June, according to an advance estimate from Statistics Canada released Friday. That followed a 0.8% drop in May, below expectations for a 0.6% drop in a Bloomberg survey.

April’s gain of 0.6% was the only monthly increase in sales so far this year.

Receipts fell in eight of nine subsectors in May, led by lower sales at hardware stores, food and beverage retailers and clothing sellers. The only retailers that saw sales rise were auto dealers, posting their third monthly gain in four months.

All in, the report shows consumers cutting back on discretionary purchases, which include furniture, electronics and sporting goods. The Bank of Canada cut its key policy rate to 4.75% in June, but restrictive monetary policy continues to weigh on Canadians.

In volume terms, retail sales fell 0.7% in May. Excluding autos, retail sales fell 1.3%, significantly lower than the 0.5% drop expected by economists.

Regionally, sales were down in nine provinces in February, with the largest declines in Alberta, led by lower car sales — bucking the national trend. British Columbia and its largest city of Vancouver also saw significant decreases. The sole province where retailing activity rose in May was Nova Scotia, driven by higher vehicle sales.

The statistics agency didn’t provide details on the June flash estimate, which was based on responses from 50.3% of companies surveyed. The average final response rate to the survey over the previous 12 months was 90%.