MNI:Canada Apr Retail Up 2nd Straight Month Amid Tariff Threat

Canada's retail sales rose a second straight month in April suggesting resilience in consumer spending even amid U.S. trade threats, as the central bank considers whether to hold borrowing costs for a second meeting early next month.

April sales were up 0.5%, Statistics Canada's advanced estimate showed Friday. The official reading for March showed sales rose 0.8%, above the agency's earlier flash estimate of a 0.7% gain. The increase was broad based with six out of nine sub-sectors increasing. The rise was led by autos including a 5.2% gain in new car sales that was the fastest since January 2023.

Analysts were concerned a drop in consumer confidence as the U.S. threatened Canada with economic domination would pull down spending and take the economy into a recession starting in the second quarter. Threats of tariffs ramped up in March and April before a recent friendly meeting between Donald Trump and Mark Carney. 

Sales at motor vehicles and parts dealers rose 4.8% in March while retail sales excluding autos fell 0.7%. That lagged the consensus for a decline of 0.1%.  

It cannot be ascertained whether March's increase in vehicle sales was due to people buying before potential tariffs boosted prices or because of confidence in making big-ticket purchases.  

Gasoline sales fell 6.5% in March following five straight increases. Prices dropped 1.6% in March on slowing global demand. 

The growth in March brought first quarter retail sales up 1.2%, the fourth straight increase. Sales volumes rose 0.2%, and volumes are a closer indication of the contribution to gross domestic product. 

The Bank of Canada held its interest rate at 2.75% in its previous rate decision last month, following seven consecutive cuts since June. The BOC has said it will "proceed carefully" and monitor risks facing the economy including how tariffs affect household spending and how cost increases are passed on to consumer prices.

Friday's retail release factors into the GDP report due May 30. StatsCan's advance estimate from monthly GDP data showed an annualized gain of 1.5% in first quarter. While recent data showed headline inflation has eased, the BOC's preferred core CPI measures rose in April, above the central bank's target ceiling of 3%, taking pressure off the Bank to return to rate cuts.