Canadian retail sales disappoint in June as consumers take pause

Fri Aug 19, 2016 12:48pm EDT
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By Leah Schnurr

OTTAWA (Reuters) - Canadian retail sales unexpectedly fell in June, reinforcing the likelihood that growth contracted in the second quarter as the economic malaise hit the consumer, who has been a key pillar of support in recent years.

Separately, the annual inflation rate cooled as expected in July, according to data released by Statistics Canada on Friday, pulled down by cheaper gasoline prices, even as the cost of food and shelter climbed.

The 0.1 percent decline in June retail sales was well short of economists' expectations for a 0.5 percent gain. May's sales were revised down to show no change from an initially reported 0.2 percent gain.

"It just suggests that maybe the Canadian consumer is growing a bit tired of carrying the burden of growth," said David Watt, chief economist at HSBC.

"And we don't really have a lot of other things that are supporting growth right now if the Canadian consumer steps back."

The retails sales disappointment hit the Canadian dollar CAD=D3, which was recently trading near sessions lows at C$1.2883, or 77.62 U.S. cents, significantly lower than Thursday's close of C$1.2767, or 78.33 U.S. cents. [CAD/]

Nonetheless, economists do not expect that consumers are down for the count just yet, particularly with the additional money they are getting from the government in the form of a revamped child benefit.

"With Ottawa sending out the first of the Child Care Benefit checks in July, there's reason to be optimistic on the second half of the year," Nick Exarhos, economist at CIBC, wrote in a note.   Continued...

Shoppers stroll through the 5.3 million square foot (492,000 square metre) West Edmonton Mall in Edmonton, Alberta February 26, 2015.  REUTERS/Dan Riedlhuber