09:12 AM EDT, 09/23/2024 (MT Newswires) -- Canadian retail sales for July came in at a 0.9% month-over-month increase on Friday, outperforming the consensus expectation of 0.6%, said Rosenberg Research .

Core sales, which exclude the auto sector and gasoline, were up 0.6% month over month. Together with Statistics Canada's "flash" August growth estimate of 0.5% month over month, the build-in for Q3 is running at a 0.7% increase -- not quite enough to reverse the 1.1% drop in sales over the first half of the year, noted Rosenberg Research.

In real terms, retail trade was up 1.0% month over month in July, indicating that a strong pick-up in volumes has occurred alongside a 0.1% decline in prices and revealing the slack that's building up in the supply side of the Canadian economy. That tells Rosenberg the Bank of Canada has plenty of room to work with as it continues to normalize its policy stance.

The bulk of the upside surprise in July came from the auto sector, where sales were up by 2.2% month over month in what might be the first response to the BoC easing interest rates. That reversed the 1.6% drop in June.

Improvements in other credit-sensitive sectors such as home furnishings which grew at 0.2%, only the third positive print this year, general merchandise, or 0.8%, and clothing and accessories at 1.1% tally with that view. Discretionary spending categories such as building and home improvement supplies, 1.4% lower, and leisure goods, which were flat, were weaker on the month.

Canada's adult population is growing at a rate of 0.3% month over month, which is by some distance the fastest rate since monthly records began in 1976. Against that backdrop, retail sales growth has been unimpressive, to say the least, added Rosenberg.

Taking the stronger July print into account, the three-month/three-

month core retail sales growth rate is still in negative territory, at 0.4%. Canada's per-capita income recession is biting -- demand is weak and slack is building on the supply side.

More monetary accommodation is needed from Canada's central bank, added Rosenberg.