Canada: Consumer spending growth is set to take a pause in April - TDS

Canadian consumer spending growth is set to take a pause in April as a slowdown in auto sales will contribute to a 0.2% m/m decline in retail sales, offsetting a sizeable tailwind from gasoline prices, suggests the analysis team at TDS.

Key Quotes

“Auto sales are forecast to cool from their record month, which should allow the ex-autos metric to post a 0.3% advance but risks are skewed to the upside. Much of this increase is attributable to higher prices (gasoline, in particular) while the relatively weak core sales prints in the prior two months point to a sizeable rebound.”

“On the other hand, there may be some modest impact from the anxiety surrounding the housing market – building material sales may decline modestly on the announcement of new regulations for the Toronto market, which have caused a slowdown in residential construction and resales. Finally, higher April consumer prices should see retail volumes come in weaker than nominal sales, though we view some giveback as a healthy development after an 8% annualized increase in the first quarter.”

“Foreign Exchange

While our below consensus forecast for both headline and retail sales will do little to alter the BoC’s intention to hike this year, we think it will nonetheless add to some CAD weakness following a period of exceptional strength last week and a continual bleed in oil prices. We look for a re-test of the key 1.3330 level, which should act as the first point of resistance and fade point. Above this, we view the 1.3380/1.3400 area as the ultimate backstop. Should the data surprise to the upside, we do not think it will be enough to break below the 1.3200 level and an opportunity to buy the dip ahead of the more important CPI data release on Friday.”