Canadian retail sales experienced a larger-than-forecast decline in May because of poor vehicle sales combined with decreased spending at supermarkets and convenience stores and liquor outlets. The 1.1% decline in retail sales reversed previous positive trends because U.S. tariff threats negatively affected household sentiment.
The sales performance of new car dealers experienced its first decline since February when their revenue dropped by 4.6% while other categories showed a 0.2% decline. The 1.4% decrease in volume-adjusted sales indicates that real consumption experienced economic decline. The food and beverage industry experienced weak sales because beer and wine and liquor consumption decreased.
The recent sales decline occurred because consumers brought forward their purchases before anticipated tariff implementation. The combination of trade concerns and negative economic outlooks probably caused consumers to reduce their spending during the late spring period.
The initial June data indicates a possible sales increase but Statistics Canada may adjust this projection. The retail industry faces ongoing uncertainty because automobile sales which represent about one-third of total retail sales continue to face potential additional declines from expanded tariffs.
The May retail sales decline indicates negative effects on second-quarter GDP performance and demonstrates the wide-ranging economic threats Canada faces during its trade negotiations with the evolving U.S. protectionist policies.
