Higher gasoline prices helped bump retail sales higher in September, but economists said it appears consumer spending has cooled after a hot start to the year.
Statistics Canada said Thursday retail sales edged up 0.1% to $49.1 billion in September, boosted by sales at gasoline stations as prices climbed due to disruptions caused by hurricane Harvey.
However, excluding sales in this subsector, retail sales fell 0.2%.
“Retail sales are losing steam, but given the sky-high rates of growth that they were tracking, a cooling was inevitable,” CIBC economist Nick Exarhos wrote in a report.
Exarhos noted the result fell short of the consensus expectations for gains of closer to 1%.
Overall, sales were up in five of 11 subsectors, representing 52% of retail trade. After removing the effects of price changes, retail sales in volume terms fell 0.6%.
Sales at gasoline stations were up 2.6% as prices rose, largely due to higher prices. In volume terms, sales at gasoline stations declined 2.5%.
Economists have been predicting the economy would slow in the second half of the year after a strong start to 2017 which saw the Bank of Canada raise its key interest rate twice.
However, while the central bank has said that future rate hikes are likely it has struck a more cautious tone about when that may happen, noting that it will be keeping a keen eye on the incoming economic data.
TD Bank economist Dina Ignjatovic said the retail sales data was in line with the slowing in economic activity expected by the Bank of Canada.
“Consumer spending has been a key driver of economic growth this year and while a more sustainable rate of growth is likely, it should remain a key support going forward,” Ignjatovic wrote.
“Indeed, some improvement in retail sales could be in the cards, in line with the uptick in housing market activity and a strong labour market.”