April 24, 2024, 09:39 AM

Canada's Retail Sales Register A Loss in February, Auto Sales Partially Recover, Notes TD

Retail sales declined by 0.1% month-on-month (m/m) in February, coming in weaker than Statistics Canada's advance estimate for a 0.1% m/m gain, noted TD.

January's print was unchanged at a 0.3% m/m decline.

Adjusted for inflation, the volume of retail sales was down 0.3% m/m in February after two months of gains.

Sales at motor vehicle and parts dealers rose by 0.5% m/m, erasing some of last month's losses. According to industry estimates, March is trending positive for auto sales, said the bank.

Sales at gasoline stations were down 2.2% m/m despite higher prices at the pump.

Excluding auto sales and receipts at gasoline stations, core retail sales were flat on the month. In volume terms, receipts at gasoline stations were down by 3.9% m/m.

The biggest losses were reported at electronics and appliance stores (-2.8% m/m) and clothing and clothing accessories stores (-1.0% m/m).

Offsetting these losses were gains at general merchandise stores (+1.1% m/m). E-commerce sales (not included in the headline tally) were up 1.9% m/m in February.

StatsCan's advance reading suggests that retail sales were unchanged in March (with almost 62% of companies surveyed providing responses).

Wednesday's decline in retail sales for February was more widespread than what TD saw in January, reflecting weaker-than-expected performance in core measures and underscoring the challenges facing consumers amid rising costs of living and financing.

Despite the overall softness, auto sales emerged as a bright spot, demonstrating their usual roly-poly resilience by bouncing from the previous month's decline. In addition, the bank's internal credit and debit spending data point to an expansion in both goods and services spending in March, keeping its real consumption tracking in the range of 2.8% to 3.0% for Q1.

Relatively solid spending momentum has been supported by still-sizeable excess deposits, robust population growth and a wealth effect. However, with the labor market losing steam, income growth is likely to moderate, dictating a slower pace of spending, added TD.

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