Canada: Retail sales to continue with the run of strong economic data - RBC

Analysts at RBC Capital Markets point out that a healthier consumer and housing backdrop are necessary conditions for Canadian GDP growth to pick up as 2019 progresses. They see recent data pointing in the mentioned direction and the they hope the improving trend doesn’t continue to be overshadowed by trade conflicts.

Key Quotes: 

“Growing trade tensions between the world’s two largest economies drew plenty of attention this week, and for good reason with the US and China tagging each other with higher tariffs. The Bank of Canada highlighted potential escalation of trade conflicts as a key economic risk, and in turn a risk to the stability of the financial system.”

“But let’s not lose sight of the fact that Canada enjoyed a run of solid economic data though the first half of May. This week it was stronger home sales and manufacturing activity; last week it was record job growth and a surge in housing starts. We expect the trend will continue next week with March’s retail sales.”

“Recall that the retail sector has underperformed recently with sales volumes effectively flat-lining over the second half of last year. Yes, sales rose at their fastest pace in nine months in February, but that was a low hurdle to clear and a good chunk of the increase was price-related. We think March’s numbers will look better in both the headline and details.”