THE TAKEAWAY: [Canada retail sales unexpectedly decline] > [Adds to signs of slowing economy; dampens speculation for rate hike] > [CAD weakens]
Retail sales in Canada unexpectedly declined in June, adding to signs that the Canadian economy is struggling to pick up momentum. Ottawa-based Statistics Canada reported today that retail sales fell by 0.4 percent in June, following a revised gain of 0.2 percent the previous month. Sales excluding autos also declined 0.4 percent in June. The latest figures fall well short of consensus forecasts, as economists surveyed by Bloomberg News had projected growth of 0.1 percent from a month ago, and 0.2 percent excluding autos.
The contraction in household spending was led by sharp declines in receipts at department stores, building material stores and gasoline stations, which fell 2.6 percent, 2.1 percent and 1.3 percent respectively. On the other hand, electronics and appliance stores reported a 1.1 percent rise in June sales.
The weakness in private sector consumption weighed on the Canadian dollar as it dampens scope for a rate hike. Bank of Canada Governor Mark Carney has been talking up speculation for a rate rise as the economy continues to ‘grow above trend’. However a slew of weaker data this month, which include declines in wholesale sales, building permits and employment as well as easing price pressures, suggest that the Canadian economy may have slowed in the second quarter by more than forecast by the Bank of Canada.
USDCAD 1-minute Chart: August 22, 2012
Chart created using Market Scope – Prepared by Tzu-Wen Chen
The loonie tumbled against the U.S. dollar following the release of the retail sales report. At the time this report was written, the Canadian dollar remained weaker, with the USDCAD pair trading at C$0.9941.
--- Written by Tzu-Wen Chen, DailyFX Research
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