What spending delay? Retail sales suggest Canadians are not ready to stop shopping

Updated retail sales numbers from Statistics Canada on Wednesday show that despite high prices and dire debt warnings, Canadians remain in the mood to shop.

The data agency reported Wednesday that retailers brought in $65.9 billion in April. That is an increase of 1.1 percent compared to March.

Virtually every type of store posted higher sales during the month, with the exception of furniture, electronics and appliance stores, where sales fell 1.6 percent from March levels.

So-called core sales, which exclude volatile items such as gasoline, cars and auto parts, rose even more: 1.5 percent.

That statistic has now risen for five consecutive months as calls for consumers to tighten their belts have increased. Sales rose in eight of the ten counties, led by New Brunswick, where they rose 4.4 percent. The two exceptions were Prince Edward Island and Newfoundland and Labrador.

In a mood to spend

Much of the spending can be attributed to inflation, as higher prices mean people pay more for the same amount of products and services, which will boost a retailer’s sales.

But sales also increased in terms of volume, up 0.3 percent over the month.

The sales increase was more than twice what economists had expected, and the data agency’s first May numbers show the month is on track for another 0.5 percent gain. That puts it on track to beat its all-time monthly high of $66.3 billion clocked in June 2022.

Shelley Kaushik, an economist at BMO, says the numbers show that consumer spending is proving “resilient” despite rising pressures. “Looking ahead, momentum in consumer spending is expected to slow in the second half of the year as higher interest rates and still high inflation continue to weigh on purchasing power.”

Royce Mendes, an economist at Desjardins, says the numbers only increase the likelihood that policymakers at the Bank of Canada will have to do more to bring inflation under control.

“Coming from a strong first quarter of consumer spending, a second consecutive monthly increase is not what the Bank of Canada is looking for as it hopes to slow domestic demand,” he said. “As such, today’s printing only works to reinforce our call that another 25 basis point increase in July is likely.”