Data released on Friday, showed retail sales jumped in June 23.7% in Canada. The positive data was offset by preliminary reports about a rise of less than 1% in July. Analysts at CIBC, point out that it’s certainly not business as usual for the retail space, and the months ahead are likely to reveal a dramatic slowdown in momentum with the potential for some backsliding.
Key Quotes:
“After clawing back ground in the prior month, retail sales roared back in June as the economy continued to reopen. But these numbers miss some of the discretionary services which were hardest hit during the pandemic. They also likely represent the satisfaction of some pent-up demand for purchases that couldn’t be made during the worst of the shutdowns, a dynamic that will fade with time.”
“While total retail sales are now above their pre-pandemic levels, some of that is simply a reflection of what’s included Canada’s retail sales numbers and what’s left out. Household spending on services is not included, and that’s an area that has been hit particularly hard by social distancing measures.”
“Statistics Canada suggested that momentum in retail sales evaporated in July, with an early estimate indicating virtually no change in the value of sales from June. The stalling of momentum in retail sales to begin the second half, and potential for backsliding after pent-up demand is satisfied, paints a picture of a long and bumpy road ahead for the economy. That said, the extension and augmentation of some unemployment benefits will help support household spending, offsetting some of the drag from the still-high unemployment rate.”
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