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Retail sales in Canada rose 0.2% in May, less than the 0.5% expected. Analysts at CIBC point out that retail sales saw little growth in May, and a preliminary estimate suggests the sideways trend continued in June. The report reflects sluggish Canadian consumer spending even before the Bank of Canada restarts its rate hike cycle.

Key quotes:

“Canadian retail sales rose a modest 0.2% in May, slightly below the consensus forecast of 0.5%, albeit after a strong 1.0% increase in the previous month. In terms of volume, total sales rose slightly by 0.1% month-over-month and were up 1.3% year-over-year. Given the strong population growth over the past 12 months, this year-on-year growth rate would still represent a decline on a per capita basis.

“While overall GDP in Q2 is still close to the Bank of Canada MPR forecast of 1.5%, today’s data suggests that consumer spending was unlikely to be a significant driver of this growth, even after accounting for growth in services spending. Industry data showing strength in areas such as manufacturing and wholesale trade suggest that inventory accumulation or business investment may be more significant contributors, which would not be bad news from an inflation perspective.”

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