Today's Report (10/22/2021)

Retail sales were up 2.1% to $57.2 billion in August, led by higher sales at food and beverage stores (+4.8%), gasoline stations (+3.8%), and clothing and clothing accessories stores (+3.9%).

Sales increased in 9 of 11 subsectors, representing 94.6% of retail trade. Core retail sales—which exclude gasoline stations and motor vehicle and parts dealers—were up 2.7%.In volume terms, retail sales increased 1.4% in August.

Amid the ongoing COVID-19 pandemic in Canada, provincial governments eased public health restrictions inseveral regions across the country, which directly affected the retail sector. In light of evolving restrictions, both retailers and consumers have adapted to changing business conditions.

Based on respondent feedback, 0.6% of retailers were closed at some point in August, compared with approximately 0.5% of retailers that were closed in July. Despite these challenging times, most respondents reported their sales figures, and Statistics Canada thanks them for their continued collaboration.

Given the rapidly evolving economic situation, Statistics Canada is providing an advance estimate of retail sales,which suggests that sales decreased 1.9% in September. Owing to its preliminary nature, this figure will be revised. This unofficial estimate was calculated based on responses received from 54.0% of companies surveyed. The average final response rate for the survey over the previous 12 months has been 90.5%.

Market Reaction

Following the release, the CAD saw some slight movement towards the downside.

What Is It?

The Canadian retail sales data reflect the total receipts of the retail sector in Canada over the period under consideration.

Retail sales account for the goods component of consumer spending, with services such as healthcare, education, travel and hotel accommodation making up the other portion.

Why Investors Care?

With consumer spending a large part of the economy, market players continually monitor spending patterns. Data are available both for total retail sales and those excluding autos and for 16 different store specializations. Since autos account for over 25 percent of retail sales, the sector can have a pronounced impact on overall sales given their volatility. Retail sales are used to estimate the goods portion of personal consumer expenditures in the quarterly GDP accounts, accounting for about 50 percent of the total.

The pattern in consumer spending is often the foremost influence on stock and bond markets. For stocks, strong economic growth translates to healthy corporate profits and higher stock prices. For bonds, the focus is whether economic growth goes overboard and leads to inflation. Ideally, the economy walks that fine line between strong growth and excessive (inflationary) growth.

Retail sales not only give you a sense of the big picture, but also the trends among different types of retailers. Perhaps apparel sales are showing exceptional weakness but electronics are soaring. These trends from the retail sales data can help you spot specific investment opportunities, without having to wait for a company's quarterly or annual report.

What Is The Effect On the market?

CURRENCY - An overall strong retail sale report could spell trouble for the CAD because many of these goods are imported.

STOCKS - Healthy retail sales are good for stocks because it can increase corporate revenues and profits, however weak retail sales or uncertainties can place downward pressure on the CAD.

BONDS - Jumps in retail sales could suggest that consumers are in a buying mood, potentially accelerating economic growth. A weak report could set a stage for bond prices to rise.