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Nomura Sees Headwinds Ahead for Canada's Retail Consumption on High Energy Costs, CUSMA Trade Deal Renegotiations

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Canadian real retail sales fell 0.7% month over month in March, but were still up 0.1% year over year, said Nomura after Friday's data.

Real retail sales rose 1.2% in Q1, suggesting consumption held up despite softening labor markets, noted the bank.

However, rising energy prices and geopolitical uncertainty have started to weigh on sentiment, pointing to softer consumption in the coming months, stated Nomura.

Recent affordability measures, including the fuel excise tax suspension and the Canada Groceries and Essentials Benefit Act, should support spending, but only "modestly," pointed out the bank. That said, consumers could curtail spending if energy prices remain elevated for a prolonged period.

Upcoming CUSMA trade deal renegotiations are another source of uncertainty that could weigh on sentiment and drag personal consumption lower, it added.

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