Retail sales unexpectedly fell in May, posting the first decline in four months. Lower receipts at food and beverage stores drove seasonally adjusted sales in May down 0.1 percent. The report runs against the broader narrative of a rebounding Canadian economy, as per the Bank of Canada and is an arrow in the quiver for those who believe the central bank will eventually need to follow the U.S. Federal Reserve in lowering interest rates. The critical question is “has Canadian household debt hit the wall and are Canadians now having to forgo what were daily items in order to service their outstanding debt?”
Also, the Bank of Canada has lowered the rate used by mortgage stress tests to determine whether would-be homeowners can qualify, marking the first drop in three years. The central bank’s five-year benchmark qualifying rate is now 5.14 per cent, down from 5.34 per cent. The qualifying rate is used in stress tests for both insured and uninsured mortgages, and a lower rate means it is easier for borrowers to qualify. Which kind of flies against what the Bank is trying to do, which is lowering household debt.
Currently Close Range
USDCAD 1.3075 1.3027 1.3016-1.3110
EURCAD 1.4667 1.4690 1.4650-1.4711
GBPCAD 1.6346 1.6346 1.6313-1.6411
Prior Actual
CA: Retail Sales May M/M 0.1% -0.1%
Y/Y 3.7% 1.0%
US: Consumer Sentiment July 98.2 98.4
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