"As long as there is significant slack in the Canadian economy, the inflation outlook remains muted, and imbalances in the household sector continue to evolve constructively, the considerable monetary policy stimulus currently in place will remain appropriate"
- Bank of Canada Governor Stephen Poloz
Statistics Canada reported stronger-than-expected retail sales in May, as demand for motor vehicle and parts was exceptionally strong. Figures showed that May's growth of retail sales in Canada overshadows economists' estimations of a modest advance, and soared 1.9% on the month, up from a 0.2% tick up recorded in the preceding month. At the same time, a measure of core sales, which exclude motor vehicles and parts, rose just 1.2%, recovering from a 0.2% drop in the prior month. In terms of volume, sales at retailers jumped 1.9%, posting a third straight month of solid growth, and the fastest pace in three years.
The gain in retail sector follows other signs of resilience in consumer spending, including stronger home construction, which came in contrast with warnings from policy makers about the threat posed by record household debt loads. Moreover, last week the Bank of Canada Governor Stephen Poloz pointed out there are signs of an evolution in household finances, and mentioned that the expansion must rotate to one led by shipments and business investment. It is widely expected that household consumption inched higher 2% annualized pace in the second quarter, ahead of the 1.6% pace of overall economic output growth.
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