Data released on Friday showed an increase in August retail sales in Canada of 2.1%, slightly above the 2% expected. For September preliminary data points to a contraction. According to analysts at CIBC markets won't take much joy in the August increase in retail sales, with the flash estimate of September looking weaker than anticipated and coming alongside a similarly disappointing manufacturing print for that month.
Key Quotes:
“Retail sales roared back in August, but then took another breather in September. With a yo-yo in sales continuing into the end of the third quarter, the level of sales in September was back where it stood in June and July. That said, while goods sales continued to be plagued by the global semiconductor shortage, the employment data suggested that services sectors appeared to be gaining strength heading into the end of the quarter. As a result, we continue to expect that the economy was able to continue to soak up more slack in September.”
“Statistics Canada's flash estimate of September retail sales revealed an ugly 1.9% retreat after the rebound in August. The separately-released sneak peak of manufacturing sales for the same month showed a similarly dreadful drop of 3.2%. Both, appear to have been impacted by the supply crunch in the auto sector, with the factory report directly referencing the transportation equipment industry as the main source of weakness.”
“The ugly flash readings for retail sales and manufacturing will dent our previously heady GDP forecast for the month. However, while goods sectors were plagued by supply chain challenges, according to the Labour Force Survey data, activity across a range of services sectors was increasing. The federal election would have helped GDP during the month too. As a result, we're still comfortable forecasting that the economy expanded by roughly 0.5% during the month.”