CIBC Private Wealth
September 24, 2024
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Retail sales surged higher in July, which followed the Bank of Canada’s (BoC) rate cut in June. It appears household demand picked up, with borrowing costs starting to go lower. As we have learned since July, interest rates have been reduced even further. The BoC is hoping rate cuts could help stimulate demand. While the outlook on spending and the economy remains a bit uncertain, early signs were positive.
- Statistics Canada (StatsCan) reported that retail sales rose by 0.9% in July over the previous month. This was the biggest jump in monthly retail sales since April 2023, coming off the BoC’s first rate cut since 2020 in June. An improvement in retail sales should bode well for the overall health of Canada’s economy.
- July’s increase was driven by a rise in sales at motor vehicles and parts dealers, which increased by 2.2%. Sales also increased at food and beverage retailers and at health care retailers.
- Looking ahead, StatsCan estimated that retail sales moved higher by 0.5% in August. If the increase proves correct, the second straight month of rising retail sales might be suggesting that looser financial conditions have allowed Canadians to raise spending.
- Recent data shows Canadian consumers becoming a bit more optimistic. The Bloomberg Nanos Canadian Confidence Index rose to 55.4 over the week ended September 20 from 53.8 in the previous week. This was the highest level since May 2022.
Looser financial conditions might be helping to alleviate some pressure on Canadian households. And a strong Canadian consumer benefits Canada’s overall economic conditions. The BoC hopes its interest-rate cuts will stimulate spending and help support Canada’s labour market, which will also benefit Canadian households.
If you would like to discuss this economic and market update or have questions about your finances and investments, please feel free to contact me anytime.