TORONTO — Nominal retail sales in May rose a stronger than expected 0.6 percent following gains of 0.7 percent and 0.6 percent in April and March, respectively, RBC Economics reported.
The increase was boosted by a stronger-than-expected 2.4 percent surge in motor vehicles sales that more than offset gasoline station receipts dropping a smaller than expected 0.6 percent.
Sales volumes rose 1.1 percent following a 0.2 percent drop in April and a 1.3 percent surge in March.
“The 0.6 percent monthly gain in May retail sales extends the pace of solid increases to three consecutive months,” said Paul Ferley, assistant chief economist. “This has contributed to the nominal value of sales rising a strong 7.3 percent over the past year and compares to the average increase in 2016 of a little over 5 percent.
“Part of this strengthening is attributable to higher energy prices that sent gasoline station receipts up by a double digit rate over the past year,” he added. “However, the overall volume of May retail sales, which eliminates the impact of higher prices, is up a solid 6.4 percent from a year ago and compares to a 2016 average increase of 4 percent.
“This strengthening in consumer spending growth is clearly benefiting from sustained gains in employment over the first half of this year along with low financing costs,” Ferley explained.
Strength in consumer spending has been a factor contributing to overall GDP rising at an above-average pace from the third quarter of 2016 through the first quarter of this year.
“Partial second quarter data is indicative of this pace being sustained for a fourth consecutive quarter. This strength in growth, and seemingly easing concerns about external impediments such as aggressive U.S. trade protectionism,” Ferley noted. “That contributed to the Bank of Canada hiking the overnight rate 25 basis points to 0.75 percent earlier this month.
“Our forecast assumes that with growth continuing at an above average pace, official rates will rise a further 75 basis points by the end of 2018 to 1.50 percent,” he added.
SOURCE: RBC Economics press release