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CIBC Sees Higher Fuel Costs Squeezing Canadian Consumer Spending

Rising fuel costs are weighing on Canadian household spending, with higher gasoline prices eroding real consumption through the spring, said CIBC Economics after Friday's retail sales data.April retail sales rose 0.5% month over month, slightly below expectations of a 0.6% month-over-month increase, but the gain was largely price-driven, wrote the bank in a note.Excluding autos and gasoline, core sales fell 0.7% month over month, while overall volumes were flat, indicating weaker underlying momentum, pointed out Andrew Grantham at CIBC.Gains were concentrated in fuel stations, autos, and building materials, while food and beverage, general merchandise, and sporting goods saw declines.The advance estimate for May points to a further 1.0% month over month rise in nominal sales, though higher gasoline prices again suggest softer real volumes, cautioned the bank.Overall, consumer spending appears to have stalled in Q2 after a strong start to the year, with elevated pump prices squeezing discretionary demand, according to CIBC.Still, the recent pullback in fuel prices and additional government support for households are likely to provide a cushion for spending later in the year, wrote Grantham.

Canada Retail Sales Rise 0.5% in April; Advance Estimate Points to Stronger May

Canada's retail sales rose 0.5% month over month to $73.0 billion in April, in line with expectations, while preliminary data for May indicates a strengthening of consumer spending amid a surge in gasoline prices, said the country's statistical agency on Friday.April's sales were up in five of nine subsectors, led by increases at gasoline stations and fuel vendors, noted Statistics Canada in a statement.The April retail sales increase was similar to the 0.6% month-over-month consensus gain figure provided by MUFG in a note earlier Friday.Core retail sales, which exclude gasoline stations and fuel vendors and motor vehicle and parts dealers, were down 0.7% month over month in April.StatsCan provided an advance estimate of retail sales, which suggests that sales increased 1.0% month over month in May. This estimate was calculated based on responses received from 52.1% of companies surveyed, while the average final response rate for the survey over the previous 12 months was 87.9%, pointed out the Ottawa-based agency.In volume terms, retail sales were unchanged in April.

Brief: Canada's Core Retail Sales Excluding Gasoline Stations, Fuel Vendors, Motor Vehicle and Parts Dealers Down 0.7% M/M in April