MNI: Canadian July Flash Retail Sales +0.4% After Q2 Stall

Canadian retail sales rose 0.4% in July according to a flash government estimate, while the official June gain of 0.1% lagged economist forecasts to close out a second quarter where spending stalled.

Statistics Canada's report Wednesday didn't break out what industries led the July sales increase, while in June the gain was carried by a 2.5% boost in car sales and higher prices that pushed up gasoline station sales 0.3%. Economists predicted sales would rise 0.5% in June, a month where StatsCan said sales grew in just three of nine categories.

The June increase wasn't enough to salvage second-quarter receipts, which not only stalled on a nominal basis but shrank 0.8% in volume terms that strip out price changes and are more closely related to quarterly GDP figures due out next week. Sales had gained 0.6% in the first quarter, unexpected strength that helped pull the Bank of Canada off the sidelines with rate increases in June and July.

Most economists see Governor Tiff Macklem holding his key rate at 5% -- the highest since 2001 -- at next month's decision on signs overheated demand may be slowing. Confidence in that view faded when this month's inflation report showed an uptick back outside the Bank's 1% to 3% target band. 

June's retail sales excluding autos and gasoline fell 0.9%, including a 1.4% fall at general merchandise stores and a 0.9% decrease at food and beverage. Total sales were down 0.6% from a year ago.