Canadian retail sales edged up 0.6% in June from May, as a rebound in auto sales helped offset weakness in other areas, but the underlying trend in spending remains modest, Statistics Canada said on Friday.
The agency said sales rose 1.1% in volume terms in June, which was the largest increase since December 2021.
Economists had forecast a 0.5% increase in sales in value terms and a 0.9% gain in volume.
Retail sales are a major economic indicator, and the data from Statistics Canada is closely watched by the Bank of Canada as it considers future interest rate decisions.
The central bank has raised its benchmark overnight lending rate three times this year to 1.50%, and it is expected to raise rates again in September, as inflation remains stubbornly high.
Higher interest rates make borrowing more expensive, which can weigh on consumer spending. The Bank of Canada is trying to cool inflation without triggering a recession.
The increase in retail sales in June was led by a 5.0% jump in sales at motor vehicle and parts dealers, the largest gain since March 2021.
Sales at gasoline stations surged 4.4%, the biggest increase since October 2021, as pump prices continued to rise.
However, sales at clothing and accessories stores fell 1.8%, the largest decline since March 2021.
Sales at sporting goods, hobby, book and music stores dropped 1.4%, the biggest decline since September 2021.
Sales at furniture and home furnishings stores fell 0.9%, the largest decline since May 2021.
Core retail sales, which exclude gasoline stations and motor vehicle dealers, rose 0.3%, the largest gain since December 2021.
Sales in volume terms rose 0.6%, the largest increase since December 2021.
In the 12 months to June, retail sales rose 6.0% in value terms and 4.6% in volume terms.
The three-month moving average of retail sales in value terms was up 0.3% in June, while the three-month moving average of sales in volume terms was up 0.1%.
This suggests that the underlying trend in consumer spending remains weak.
The Bank of Canada is expected to raise interest rates again in September, which could further weigh on consumer spending.
However, the central bank is also expected to start cutting rates in 2023, which could provide some support to spending.
The outlook for retail sales remains uncertain, as it will depend on how consumers react to higher interest rates and how the economy performs overall..
