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Today’s report showed that Canadian retail sales rose 0.6% in March and February data was revised higher. Despite the positive data for April, Jocelyn Paquet, analyst at National Bank of Canada, points out it won’t be sufficient to salvage Q1 performance.

Key Quotes:

“Canadian retail sales increased 0.6% in March to C$50.2 billion, topping consensus expectations which were looking for a +0.3% print. That result came after an upwardly revised +0.5% reading the prior month (initially reported at +0.4%).

“Discretionary sales, i.e. sales excluding gasoline, groceries and health products, rose for a third consecutive month, climbing 1.6% m/m.”

“The retail results for March came in above consensus expectations thanks in large part to the steepest increase in five months in the motor vehicles/parts category. Increased outlays on cars were also responsible for the jump in discretionary sales.”

“The good monthly showing Canada-wide will not be sufficient to salvage Q1’s performance. Indeed, real retail sales are on pace to decline 4.0% in annualized terms in the quarter, a result which could translate into the first negative contribution to GDP from consumption spending on goods since 2015Q1.”

“Several elements can explain that poor showing notably the moderation of job creation in the first three month of the year and particularly poor weather early in 2018. Whatever its cause, the deceleration of consumption growth in Q1 is consistent with our view that Canadian real GDP growth softened to roughly 1.5% annualized in the first quarter of the year.”