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Data released on Friday, showed retail sales in Canada tumbled 10% in March, in line with market estimates. Krishen Rangasamy, analyst at the National Bank of Canada argues the saving rates likely shot up in March.

Key Quotes:

“Government-mandated lockdowns restricted shopping in the last two weeks of March, with devastating impacts on the month’s retail spending.

“According to Statistics Canada, about 40% of retailers closed their doors in March for an average of five business days.”

“The March slump means that retail volumes contracted 7.3% annualized in Q1, the second largest quarterly drop on records (after 2008Q4). So expect a sharp contraction of real consumption spending (and GDP) when Q1 results are presented by Statistics Canada next week.”

“Because of the circumstances of forced savings (via confinement), the personal savings rate likely shot up in March. While a higher savings rate should help cushion the blow of reduced income stemming from massive job losses, it’s unlikely to fully smooth out consumption which is set to contract at an even faster pace in Q2 ─ note that the statistical agency put out an “advance estimate” of -15.6% for April retail sales.”