Retail sales in Canada surge in June, but are expected to drop in July

OTTAWA, Aug.20 (Reuters) – Canadian retail sales jumped 4.2% in June from May, driven by a strong rebound in demand for clothing and accessories, while retail sales in July likely fell 1.7%, according to data released Friday.

June’s gain was slightly lower than analysts’ average estimate of 4.4%, according to Statistics Canada data. Excluding motor vehicles and parts, retail sales increased 4.7%, barely exceeding expectations of 4.6%.

Sales increased in eight of 11 subsectors, accounting for 69.5% of retail, as COVID-19 restrictions were relaxed and Canadians flocked to non-essential stores, Statscan said.

“There is nothing like retail therapy to cure post-containment blues,” Royce Mendes, senior economist at CIBC Capital Markets, said in a note to clients.

“The general rebound after the lockdowns shows the willingness of Canadians to spend and, more broadly, how quickly the economy can rebound when cases of Covid are low,” he added.

While the preliminary estimate for July was disappointing, economists noted that even with the decline, retail sales remain well above their pre-COVID-19 levels. July’s drop could also signal a shift towards increased spending at bars and restaurants.

“It is very possible that spending has shifted to services as this sector has reopened more fully,” said Benjamin Reitzes, Canadian rates and macro strategist at BMO Capital Markets.

Canadian provinces relaxed restrictions until spring as new cases of COVID-19 fell as part of a successful vaccination campaign. But a rebound in COVID-19 cases induced by the Delta variant is starting to cloud the outlook.

Clothing and accessories sales soared 49.1% in June, sporting goods sales up 27.9% and home goods up 23.2%. New car sales rose 3.3% and used cars jumped 3.0%.

($ 1 = $ 1.0000)

Reporting by Julie Gordon; edited by Jonathan Oatis

Our Standards: Thomson Reuters Trust Principles.