Canadian retail sales will test the resilience of the consumer

Canadian retail sales are due on Friday and expected to show a 0.4% m/m for the February reading but the real test will be the advance March reading, which doesn’t have a consensus estimate.

The best clue we have is from the RBC report on its card data.

We saw signs that Canadians are pulling back on purchasing discretionary goods, although broader spending trends remained resilient in March compared to the dramatic pullback in consumer confidence measures.

The data showed that overall spending edged lower in March but the bank warned that cardholder data doesn’t capture auto sales, which other data sets indicated were strong. Their overall index fell to 152.3 from 152.5.

The puzzle that market participants are trying to solve is the divergence between weakening survey data and resilience in hard numbers. Generally, the surveys precede drops in hard data but not always, particularly when there is confusion, angst or anger about policies. Much of this is often dismissed as partisanship in the United States but it’s hardly a US-only phenomenon as Canadian consumer sentiment has also plunged recently.

Canadian consumer confidence plunged to a record low, but that crater wasn’t mirrored in our cardholder spending data—at least not by the same magnitude.

They note that Canadian consumer confidence fell 16% in March but spending was down just 0.1%.

Within the data, RBC notes that goods spending is weak but services data is resilient and that’s backed up by restaurant reservation data from OpenTable, which was 18% above year-ago levels at the end of March into early April.

This article was written by Adam Button at www.forexlive.com.