Data from Statistics Canada on Friday revealed retail sales disappointed in April while inflation was stronger than expected.
It was more confusing data about precisely how well the Canadian economy is rebounding following a dismal first quarter, in which gross domestic product shrank an unexpected 0.6%.
Nevertheless, listed here are five themes in Friday’s data that Canadians should pay attention to in the coming months.
Food is quickly getting more expensive
“Aside from energy, food prices continue being a theme within the inflation data,” said Nick Exarhos economist at?CIBC World Markets.
Consumers paid 3.8% more for their food in May when compared during the same time this past year. Meat prices were a big factor, up 7.9% year over year. But Canadians were paying more for everything: prices for vegetables were up 5.8%, bakery products were up 3% and fresh fruit prices were up 2.9%. Canadians also spent more to eat out, with restaurant prices up 2.9% from last year.
“Food costs happen to be trending near, or over 4% for the past many months, and highlight how a cheaper Canadian dollar is boosting imported prices,” said Exarhos.
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Car dealerships are raking within the dough
Cars sales have soared in Canada this season, bolstered by some of the cheapest financing offerings on record. Statistics Canada said that continued in April, motor vehicle and parts dealers posting increased sales of just one.3% – the 3rd consecutive monthly gain.
New car dealers contributed the biggest portion of the increase, with sales up 1.2%. But the gains were overall, with used dealers seeing sales up 5% and automotive parts, accessories and tire stores selling 2.7% more.
Future Shop, Target closures hurt sales
Doug?Porter, chief economist at?BMO Capital Markets, pointed out that the sudden closure of all of Target Corp.’s stores continues to create noise within the data. The information also likely suffered from the lack of sales from Future Shop this season, which closed all its stores in March.
“Store closures and also the timing of new product releases contributed to an 8.8% sales drop at electronics and appliance stores,” Statistics Canada felt.
“Like many other indicators early this year, we suspect these soft retail outcome was somewhat polluted by the Target closure (in mid-April),” said Porter.
Have energy prices bottomed?
Energy prices in Canada decreased 11.8% within the 12 months ending in May, however the drop wasn\’t as bad because the 13.5% decline in April.
“Energy prices still weigh on headline inflation, even though the impact has declined somewhat with the recent stabilization in commodity markets,” said?Brian DePratto, economist at TD Economics. “Similarly, fuel oil prices [gasoline] declined 18.6% in May, after a 20.0% drop the month prior.”
The data suggests April GDP growth is going to be weak
Overall, the weak retail sales will probably combine with a disappointing manufacturing report to weigh down the Canadian economy in April.
That is likely to concern the Bank of Canada, which is looking for a rebound in the second quarter following a dismal Q1 indicators.
“[The data] comes after a quarter that barely saw any consumer spending,” said?Jimmy Jean, senior economist at Desjardins
Still, the preliminary readings suggest the Canadian economy will be able to eek out a bit of growth, with many economists expecting that a bounce back should definitively be seen in the other half of the year.
“That\’s clearly a negative for April\’s GDP outlook, which now looks more prone to come in no better than a 0.1% gain,” said?Nick Exarhos, economist at CIBC World Markets.