MNI: Canada Retail Sales Point To Strong Q2 Even As BOC Hikes

Statistics Canada reported Tuesday that retail sales rose 1.6% in May according to a flash estimate following a 0.9% April increase, suggesting demand remains strong in the second quarter as the central bank continued raising interest rates. 

April's gain came even as new car sales fell 0.8% with many automakers still struggling to deliver product to dealerships. Excluding autos and parts sales rose 1.3%, more than double the 0.6% gain economists predicted. Total sales were more in line with the expected 0.8%. 

Sales have been on a solid upward path for about a year and the BOC has recently focused more on surging inflation than how tightening may derail heavily indebted consumers. With StatsCan likely to report Wednesday that consumer prices are rising 7%, economists predict the Bank is likely to keep hiking by at least 50bp at its July 13 meeting. It hiked 25bp in March and 50bp in April. 

Consumers are still being squeezed at the pumps with gasoline station sales up 40% in April from a year ago, while total inflation-adjusted retail sales rose just 2%.