Canada Retail Sales Decline by 0.7% in July Amid Trade Uncertainty

Canada's retail sales experienced a decline in July, coming in at -0.7% compared to the previous month. This was marginally better than analysts' expectations, which averaged out to be around -1%. The drop in sales is attributed mainly to general merchandise retailers, who saw their sales plummet by 1.9%, accounting for up to 15% of total retail sales.

The only sector that showed an increase in July was building materials, with a rise of 0.8%. Despite this, the overall decline in retail sales is concerning, as it accounts for approximately 40% of consumer spending and serves as an early indicator of gross domestic product growth. Motor vehicles and parts dealers also saw a decrease in sales, falling by 0.8%, while purchases at food and beverage retailers dropped by 0.1%.

Katherine Judge, senior economist at CIBC Capital Markets, believes that the momentum from this decline is unlikely to continue, citing lingering trade uncertainty as a major factor. This suggests that the Bank of Canada may not raise interest rates in the near future.