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Retail Sales Real Momentum Likely Faded Further In June

CANADA
  • Retail sales were stronger than expected in May, rising a nominal 2.2% M/M vs the 1.6% from the advance release with volumes unsurprisingly much more subdued at +0.4% M/M.
  • The June advance was disappointing however, only rising a tepid +0.3% M/M in nominal terms despite still strong inflation (headline CPI +0.6% as a proxy).
  • Implications are muddied by the fact the potential fading in momentum could either be as rate hikes start to curtail demand or a faster rotation to services over the summer, or a combination of the two.
  • The release has helped front-end GoCs close some of the underperformance to Tsys (2YY -5.7bps vs -6.5bps) whilst USDCAD sits only a few pips higher since the release but in doing so steadies an earlier decline.
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  • Retail sales were stronger than expected in May, rising a nominal 2.2% M/M vs the 1.6% from the advance release with volumes unsurprisingly much more subdued at +0.4% M/M.
  • The June advance was disappointing however, only rising a tepid +0.3% M/M in nominal terms despite still strong inflation (headline CPI +0.6% as a proxy).
  • Implications are muddied by the fact the potential fading in momentum could either be as rate hikes start to curtail demand or a faster rotation to services over the summer, or a combination of the two.
  • The release has helped front-end GoCs close some of the underperformance to Tsys (2YY -5.7bps vs -6.5bps) whilst USDCAD sits only a few pips higher since the release but in doing so steadies an earlier decline.