Canada: Retail sales bounced back as lockdowns eased but still below pre-COVID levels – NFB

Data released on Tuesday showed retail sales jumped a record 18.7% in May (market consensus 20%). According to National Bank of Canada analyst Jocelyn Paquet, warns about reading too much into a single month’s results and explains sales will have the worst contributions ever to quarterly growth in Q2. 

Key Quotes:

“The record-breaking increase in retail sales in May suggests consumer spending rebounded fast following the Covid-19 shock. However, we must be careful not read too much into a single month’s results. The latest numbers could have been boosted by pent-up demand following weeks of lockdowns.”

“Barring a massive rebound in employment, this will squeeze household income and weigh on retail sales later this year. But until then, the gradual recovery in household spending is likely to continue.”

“Statistics Canada estimates that headline retail sales rose another 24.5% in June, a result which would leave total outlays down just 0.4% on their February level. Even accounting for that positive print in June, headline retail sales would still have dropped 46.8% in annualized terms in Q2, the most ever. This will no doubt translate into one of the worst contributions ever to quarterly growth from household consumption.”