MNI: Canada Retails Show Q3 Strength As BOC Mulls Pace Of Cuts
Retail sales rose for a second month in August according to Statistics Canada's flash estimate Friday, suggesting momentum in the third quarter as the BOC considers how fast to keep lowering interest rates.
The August gain of 0.5% didn't come with a breakdown of which sub-sectors led the increase, while the July increase of 0.9% included seven of nine sub-sectors led by a 2.2% gain in autos. The July figure beat the consensus for a 0.6% increase. Excluding autos, July sales rose 0.4%, higher than economist forecast of 0.1%.
The Bank of Canada has cut interest rates three times in a row from June to September, when officials said the prospect of weaker-than-forecast Q3 growth could lead them to faster reductions in borrowing costs. Governor Tiff Macklem also said a period of above-potential growth would help avoid an undershoot of his inflation target.
After removing price changes total sales rose 2.2% year-on-year, showing resilience against some economist forecasts that the Bank's earlier rate hikes to the highest since 2001 would tank the economy. Many economists point to other signs of slack like rising unemployment and falling per-person GDP as a reason the Bank needs to keep cutting rates and consider a 50bp move.