Statistics Canada reported this morning that retail sales in July dropped by a surprisingly large 0.6 per cent compared to the prior month. Most of the decrease in sales, StatsCan, said was the result of lower gasoline prices. Still, with a rising unemployment rate, most economists believe consumer spending will be tepid at best for the remainder of the year.
How does this important new piece of economic data fit into the larger scheme of things? Here's the take from the economics department at Royal Bank of Canada:
…the economy is emerging from recession with real GDP forecast to increase by 0.6% in July, building on June's 0.1% rise. Upside surprises in wholesale and manufacturing activity combined with a rebound in home sales augur well for real output to have risen in July. Despite the improved tone in the overall growth numbers, however, the economic recovery will be mild by historical standards and downside risks to the outlook remain. This means that stimulative monetary conditions are warranted to ensure that the improving trend is sustained.
and here's the bottom line from Benjamin Reitzes at BMO Capital Markets:
July’s retail sales report was certainly disappointing, but falling prices made the headline look overly weak. The modest decline in volumes won’t keep real GDP from posting a solid monthly gain of as much as 0.5% (thanks to the solid increases in manufacturing and wholesale trade), and could set up a strong retail sales report in August (similar to what we saw in the U.S.).