Retail sales in Canada climbed by 0.1% to $65.9 billion in June, according to data released by Statistics Canada on Wednesday. Despite the slight increase, the new data offers evidence of cooling consumer demand.
The increase was entirely driven by the sales of motor vehicles and parts. Excluding motor vehicles, retail sales fell by 0.8%. Excluding motor vehicles and gasoline, the decline was 0.9%.
Households are feeling the heat of rising interest rates as they cut down on purchases in most categories, from food to clothing to furniture.
The only category with a sizeable jump was motor vehicles. Consumers who placed orders last year to early this year are only receiving their cars now as the wait times for new vehicle delivery has ranged from several months to over a year. The sales of new cars jumped by 2.9%, more than offsetting declines in all other categories. The used car market also went up by 0.9%.
Read more of RSM Canada’s economic insights on the middle market.
Unsurprisingly, with consumers in the busy summer travel season, spending on gasoline and at gasoline stations went up by 0.3%.
Advance data shows that sales are expected to increase by 0.4% in July as travel hits its peak. But as the payments on these vehicles hit, households will rein in spending.
The pullback in consumer spending shows that interest rate hikes are working, just as the Bank of Canada expected. The retail sales figures further suggest that no further increases are in the picture, and 5% would likely be the rate peak.