Statistics Canada (StatsCan) released its retail trade report yesterday, showing Canadian shoppers spent more in May. Retail sales were again driven by higher gasoline prices in May, but the underlying data showed signs of higher spending elsewhere in the economy, which is a departure from the previous two months. Retail sales outside of gasoline stations may benefit from a pullback in gasoline prices. Although, gasoline prices remain elevated compared to the beginning of the US-Iran conflict as tensions in the Middle East have recently escalated.

• Retail sales rose 1.0% to $73.7 billion in May, with all nine subsectors posting gains, led by a 3.1% jump at gasoline stations and fuel vendors.
• In volume terms, sales rose by a more modest 0.3%, reflecting still elevated gasoline prices.
• Sales at motor vehicles and parts dealers also increased in May, marking a second consecutive increase in this key sector of Canada’s economy.
• Core retail sales, which exclude gasoline and motor vehicles, climbed 0.9% in May, bouncing back from a 0.7% decline in April. General merchandise retailers led the rebound, up 1.0%, for their first gain in three months.
• Looking ahead, StatsCan’s early estimate points to a smaller 0.4% increase in June. This unofficial figure will be revised when the official June data is released on August 21. Another increase in June would mark the sixth straight month of rising retail sales.

May’s numbers point to steadier consumer spending after a relatively modest April, and the rebound in core sales is especially encouraging since it strips out swings in gasoline prices. June’s early estimate suggests some of that momentum may be cooling, though it’s too early to draw firm conclusions from an unofficial number. For now, the data supports the view that Canadian households are still spending, even as trade and geopolitical uncertainty cloud the broader outlook.

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