Canadian retail sales for April rose 0.5% month-over-month

[00:00:00]Statistics Canada has just released the latest Canadian retail numbers. They are up 0.5% month-over-month for the month of April to a little bit off of initial expectations to survey was at 0.6% for some more reaction and in-depth analysis. We are joined by Charles chief economist at Service Credit Union. Good morning, Charles. How are you?

[00:00:22]>> Good morning.

[00:00:23]>> So let's get into it, shall we? Off a little bit too from an expectation and we're going to get some more details here clearly, but give us your initial reaction.

[00:00:30]>> We knew retail sales would be boosted because we've saw plus 0.5 it's a bit weaker, but most of it is boosted by gasoline prices. So that was we what we expected, but when even when we remove that we remove also there was some big contribution from motor vehicle sales. Once we remove those factors, we're actually kind of broadly flat in terms of retail sales.

[00:00:53]So it's a bit of a disappointment in some ways, but at the same time it's not necessarily surprising. We knew with the big increase in gasoline prices over the month. We knew with the increase uncertainty that those would be headwinds on consumers.

[00:01:08]>> And and you know, generally too, you know, how is it you talked about how disappointing I think it is in in some ways, but not necessarily surprising. As we look at what's happening at least for right now when it comes to inflation and otherwise, I think maybe looking to a little bit more strength and we'll see what happens in the Middle East, but overall too, just you know, expand upon that a little bit to what we could see here and what we're going to see for the next couple of months once we get that data.

[00:01:32]>> Yeah. Well, I think when we look at it in a on a kind of a longer perspective.

[00:01:36]Yes, April is on the weaker side.

[00:01:40]March was not great either, but the months before you could see some strength building or at least some resilience in consumer spending gradually building. So it's kind of suggested that consumers were on a better footing before we had the energy shock. Though we kind of hope that now with seeing already energy prices normalizing somewhat, we have uh oil now at what, $76 a barrel roughly, we should see lower gasoline prices, and then we could probably see that consumer spending start to pick up as we get into the summer months.

[00:02:14]>> Yeah, it's going to be interesting to see. Colin, go ahead if you have a question for for Charles.

[00:02:18]>> Uh I do. [clears throat] Of the of the remaining sales, two things intrigue me.

[00:02:22]One is was there anything in particular that drove the the increase in auto sales? And and the second one was of the remaining, was there any kind of a split between between discretionary and staples?

[00:02:34]>> Yeah, well, when we look at it is that obviously motor vehicle sales part of it is a comeback from some weakness we saw in March. We also saw new rebates being put on EV, so I wonder I would have to look more at more of the details whether or not it may have driven a bit more of an increase in prices on that side, but we can see in the data, for example, food is spending at at food stores has been also lower. It's been a kind of it's been a mix, but it seems to be mainly essentials that people have been kind of curtailing so far with from I can see from the very quick look at the details.

[00:03:12]>> And and so as that happens, you know, what's that an indication for you at at least, you know, we talk about some of the lack of growth and we heard from Tiff Macklem in the Canadian economy.

[00:03:20]And this isn't this isn't going to be this is the end all and be all and necessarily too. But some of this weakness and where we stand if there's not necessarily going to be that growth in sales either, you know, is it that concerning or where do you land to on your concern level for some of these numbers that in the in the data that we are seeing?

[00:03:36]>> Yeah, well, it's concerning more in terms of it shows weakness on the consumer side.

[00:03:44]However, the question is always how much of that weakness was not expected. We knew with the energy shock that we would see a rough patch for consumer spending. I think for now it's really as we get with the data from June, July and we see kind of more normalization into energy prices. Do we see consumers starting to bring to come back and start spending? And I'm explaining with there was already that trend coming up. We were looking for example spending per person adjusted for inflation. We're on an on improving trend since about the mid about last fall. And that trend had been continuing if it was not for the energy shock. We would probably still be on a better on a better footing on that front. So, what will be interesting to see is that how much of the current shock will end up being temporary on on creating some growth weakness and as we see energy prices normalizing, do we see a pick up as the summer happens or comes in terms of consumer spending?

[00:04:48]>> Go ahead, Colin.

[00:04:50]Have we This is a more than a general question, but have we seen any any impact yet of of the World Cup on spending or is it too early to talk about that?

[00:05:00]>> Well, it's a bit too early. We can see for example if we look at it as some more real-time data. If you look at for example bookings on OpenTable and things like that, you're seeing the level of activities in Vancouver and Toronto to be much bigger much higher than they would be at this time of the year, but it's a bit still too early. But we know there will be a boost in June and probably for from the World Cup. The problem is that is only temporary. Is it a boost for one month and then you come back to more your your normal reality as we get into July.

[00:05:39]>> And and as we get to the summer too, Charles, you know, and we talk about, you know, the price of gas and and where it has come down I think significantly as well and and how much the energy has been driving some of the sales at at least for right now. But, we've also talked about the hesitancy of consumers, you know, the lack of travel plans, and how much money people are going to be spending on tourism here over the course of the summer. It has That has to be, you know, at least a little bit, we'll see what happens with the end of this conflict and and where that those prices go in the next little bit. But, still has to be a little bit concerning for now, given those in those factors and what we could see normally, you know, the busiest season of all.

[00:06:17]>> Yeah.

[00:06:17]>> Oh, that's for sure. Uh most households have already planned their summer. They have already booked their holiday. So, it will be hard in the second half of June to suddenly change, but we never know. Maybe there could be some good rebates that could entice more consumption later in the summer. So, we'll have to see how quickly behaviors are willing to to adjust to maybe lower oil to lower energy prices, and if that will spur more or kind of a comeback on those kind of type of spending, especially going on holidays and day trips and all those.

[00:06:54]>> Charles Denner O'Brien, chief economist at Service Credit Union, thanks so much for the analysis, Charles. Appreciate it.