CANADA DATA: Volatile Retail Sales Won't Stop BOC Worrying About Consumption

Retail sales growth was weak in July as expected, particularly in core terms, but August's advance reading suggests a solid enough rebound - continuing the volatility in this series. The August reading, if borne out, suggests a slow but relatively steady rate of consumption in Q3 which probably won't be a major mover for the Bank of Canada after this week's 25bp rate cut. 

• Sales matched StatCan's flash estimate in July, contracting 0.8% M/M - with a small upward revision to June to 1.6% (1.5% prelim). Ex-auto sales however fared far worse, contracting 1.2% (consensus was -0.6%), albeit offset by a 0.3pp upgrade to 2.2% in June.
• This translated into a 0.8% M/M decrease in volume terms, and came on poor sales across the board (sales fell in 8 of 9 subsectors). Sales were particularly hit by supermarket sales reversing (-2.5% in Jul after +2.6% in Jun). and weak clothing retail (-2.9%), though as implied but the broader aggregates, motor vehicle and parts dealer sales rose (0.2%) albeit gas sales fell 0.9% (though  this reflected lower prices, as volumes rose 0.2%).
• Attention as usual was on the advance indicator, which showed that August sales rose 1.0% M/M. That makes a material difference to overall sales momentum, with 3M/3M annualized sales potentially picking up from -0.4% in July (weakest in a year) in nominal terms to 2.2% (5-month high), and from 0.0% (also weakest in a year) to 2.1% in volume terms.
• The BOC described Q2 consumption as growing at a "healthy pace" (the July MPR expected "Consumption growth remains modest in the second half of 2025")  but Gov Macklem's opening statement said "in the months ahead, low population growth and weakness in the labour market will likely weigh on household spending."