The Canadian retail sales report showed a collapse of 26% in April, much more than expected but at the same time, Nathan Janzen, Senior Economist at RBC Economics, notes that preliminary estimates point to 19% rebound in May.
Key Quotes:
“Statistics Canada already provided an advance estimate that overall GDP declined 11% in the month, but reports to-date have left risks tilted to the downside of that.”
“It is also increasingly clear that the massive decline in economy-wide output ended at two-months in April – and that is still taking some of the sting out of exceptionally ugly backward-looking economic data. Statistics Canada’s preliminary count of May retail sales showed an increase of 19%. That would still retrace less than 40% of the decline over the prior two months, but virus containment measures have continued to ease – and at least in Canada without a corresponding increase in virus spread to-date.”
“And government income supports for those losing work due to COVID-19 are also exceptionally large. So spending probably has continued to increase into June.”
“Some form of virus containment measures are likely to remain in place at least until there is a vaccine or more effective treatment – and that will leave the economy operating below capacity for the foreseeable future. But the long-road to recovery still very likely started in May.”
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