By Ketki Saxena
Investing.com -- n the face of high borrowing costs, Canadian consumers appear to be cutting back on big-ticket purchases. Recent reports from Statistics Canada indicate a mere 0.2% increase in retail sales for April following a decline of 1.4% in March and a slight decrease of 0.2% in February.
This trend aligns with predictions of an economic slowdown this year as household spending weakens. Although early estimates suggest a modest rise in sales during April, it fails to compensate for two consecutive months of losses at the end of Q1. The last time retailers experienced back-to-back declines was during COVID-19 restrictions between April and May 2021.
The recent retail figures serve as another indicator that Canadians, burdened by substantial mortgage debt levels, are adjusting their spending habits due to increasing interest rates. Data released by the Bank of Canada reveals that approximately one-third of borrowers have seen their mortgage payments rise while new homebuyers increasingly rely on credit cards to manage expenses.
Analyzing Q1 performance, overall retail sales increased by only 0.7%, with volume terms showing an uptick of just 1.2%. However, detailed information about April's numbers is not available since they are based on responses from merely 38.2% of surveyed companies.
Economists' median estimate matched the drop observed in March sales data reported by Bloomberg survey results; excluding autos and parts sector led to a further decrease (0.3%) compared to expected decline (0-8%). In terms of volume metrics, there was also a dip - down by 1% in retail sales.
In a regional breakdown, March saw declining sales across five of the nine subsectors, amounting to 55.5% of total retail trade. Additionally, all provinces experienced reduced sales with the exception of British Columbia.