On April 24, data released on Friday showed that retail sales in Canada fell 0.2% in February, a better-than-expected figure, but a weaker-than-expected 0.7% decline excluding autos.
Canadian Imperial Bank of Commerce analysts see the softness in spending, which excludes autos, as a sign that higher interest rates are having an impact.
They think the Bank of Canada will keep rates on hold for the rest of the year. Even if the overall economy has performed better than expected recently, the softness in retail spending excluding autos suggests that higher interest rates do have an impact on consumer spending decisions.
This spending weakness should help keep commodity price inflation in check (assuming supply chain issues don’t get worse), allowing the Bank of Canada to start gradually cutting rates in early 2024.