Canada’s consumers are starting to feel the pinch of higher interest rates as they pull back on spending.
(Bloomberg) — Canada’s consumers are starting to feel the pinch of higher interest rates as they pull back on spending.
Retail sales fell 1.4% in March, according to a preliminary estimate released by Statistics Canada, which would be the biggest monthly decline since last July. That followed a 0.2% decrease in February receipts, and a deeper-than-expected 0.7% drop in purchases excluding autos.
The data point to the possible arrival of a long-expected crimp in consumer spending, after one of the of the most aggressive rate-hiking cycles in Bank of Canada history. A slowdown in consumption is expected to bring the economy to a stall in coming months, though analysts and policymakers have repeatedly pushed back the timing of a slowdown.
“The start of the year surge in retail spending appears to be gradually fading,” Andrew Grantham, an economist at Canadian Imperial Bank of Commerce, said in a report to investors. “Even though the economy as a whole has performed better than expected recently, the sluggishness in retail spending volumes over the past year is a sign that higher interest rates are still having an impact on consumer spending decisions.”
In February, receipts fell in four of nine sectors, with lower purchases of gasoline driving the decrease. Sales in Canada’s two largest provinces, Ontario and Quebec, rose on the month, while falling in most other parts of the country.
Stripping away the impact of prices, February sales declined 0.7%, the agency said.
The March estimate is based on responses from 28% of companies surveyed, so it could be significantly revised.
Friday’s retail sales numbers are the first major data release since Canada’s largest public sector union went on strike, which led Statistics Canada to cancel media lockups and in favor of web-only publication.
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