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Analysts On "Lethargic" Retail Sales

CANADA
  • BMO: Retail sales fell in March, weighed by drops in both autos and gasoline. The decline was smaller in volume terms, and still results in a solid increase for the first quarter. More broadly, consumer spending looks to be losing momentum heading into Q2.
  • CIBC: Although spending on services is likely to have held up better, a softening trend in retail sales volumes towards the end of Q1 is a sign that perhaps the BoC simply needs more patience, rather than more interest rate hikes, in its quest to bring inflation back down to target. That said, if the labour market doesn’t start to loosen, a further rate hike can't be ruled out, and the cuts that we are forecasting in 2024 could come slightly later than we were previously forecasting.
  • Desjardins: The strong start to retail sales volumes this year has now been erased as the slight rebound in the nominal April flash estimate of 0.2% m/m suggests volumes contracted once again with goods prices were higher in April. The latest data is consistent with an economy that's showing signs of slowing and should take a bit of the pressure off BoC after this week's hot inflation print.
  • TD: The most fitting epithet to today's report is "lethargic". Looking ahead, spending is poised to step down to a below trend growth with stronger headwinds from rising costs of borrowing as the cumulative effect of higher policy rates works through the economy. Based on yesterday’s FSR, while some homeowners may mitigate increasing costs by extending amortization or tapping into an estimated $140 billion in excess personal deposits, many will see a notable reduction in their financial flexibility. This, in turn, may limit the BoC's appetite for another rate hike.
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