Softer household spending keeps the Bank of Canada on hold through 2026, CIBC says
Statistics Canada revealed Canadian shoppers spent more in April largely because filling the tank cost more, with spending away from the pump barely moving.
Retail sales rose 0.5 percent to $73.0bn, but gasoline stations and fuel vendors accounted for nearly all of the gain.
The increase fell short of the 0.6 percent that analysts polled by Reuters had expected.
For markets, the softness in discretionary spending carries a clearer read than the headline.
Andrew Grantham, senior economist at CIBC, said high gas prices cut into households' ability to spend elsewhere through the spring.
Weak household spending makes it harder for companies to "pass through cost increases to consumers," he told BNN Bloomberg, so the earlier oil-price spike is less likely to spread into broader inflation.
That reasoning underpins his view that the Bank of Canada will hold rates throughout 2026.
Statistics Canada reported that core retail sales fell 0.7 percent for a second straight monthly decline.
The core measure strips out gasoline stations and fuel vendors as well as motor vehicle and parts dealers.
Food and beverage retailers led the drop at 2.0 percent, followed by general merchandise retailers at 1.7 percent.
In volume terms, overall retail sales held flat after falling 0.7 percent in March, BNN Bloomberg reported.
Gasoline stations and fuel vendors posted a 5.1 percent jump, a rise Reuters attributed largely to higher fuel prices, though volumes in the subsector rose just 0.8 percent.
Motor vehicle and parts dealers, which Reuters said account for over a quarter of total retail sales, gained 1.7 percent, helped by a fourth consecutive monthly gain at new car dealers.
The broader economy looked firmer than the retail figures suggest.
The Wall Street Journal reported that industry-level GDP rose 0.4 percent in April, pointing to better footing after output fell 0.1 percent annualized in the first quarter, following a 1 percent contraction in the final quarter of 2025.
Statistics Canada's advance estimate points to a 1 percent rise in retail sales for May, a figure it cautioned it would revise.
Economists expect the energy drag to ease.
Ariane Curtis, senior North America economist at Capital Economics, said flat April volumes suggested consumers could be past the worst of the high-gas-price fallout.
"We suspect that consumption growth will pick up again in the second half of the year," she told the Journal, citing rising consumer confidence and the recent fall in gasoline prices.
Bank of Montreal senior economist Shelly Kaushik told BNN Bloomberg that lower June energy prices and the Middle East peace deal "could set the stage for more meaningful growth in the second half of the year."
That outlook firmed up after an initial agreement between the United States and Iran on Wednesday called for a permanent end to hostilities.
