04:26 PM EDT, 07/22/2024 (MT Newswires) -- Ahead of this week's Bank of Canada rate decision, a weak retail sales result will have "helped solidify" the case for a follow-up rate cut, says BMO's Douglas Porter in an early release of an overnight note.

Porter noted not only was May's soft 0.8% drop below expectations, but the flash read on June was also "sour" at down 0.3%. If accurate, he said, the latter estimate will leave sales barely above year-ago levels in June, despite 3% population growth and near-3% inflation. "That's one sluggish consumer spending backdrop," Porter added.

Porter said while it's true that U.S. retail sales "are not exactly on fire either," he added at least they were up 2% y/y in June, and "that's without a population surge providing an artificial lift". He cited a chart that suggests U.S. retail activity had a much stronger starting base from the post pandemic snap-back.

"The fact that Canadian sales never managed to close that growth gap with their U.S. counterpart speaks to the heavier weight on Canadian consumers from high rates. And, fundamentally, that's a

solid reason for the Bank carving out a semi-independent path from the Fed," he added.