Time for Bank of Canada to Move Off The Sidelines as Retail Sector Shows Zero Inflation Pulse, Says Rosenberg Research

10:27 AM EDT, 08/25/2025 (MT Newswires) -- The Canadian consumer sprang into summer with retail sales rebounding by a nice 1.5% month-over-month increase in June, which was expected, and more than wiped out the 1.2% May shower, said Rosenberg Research after Friday's data.

What particularly added a glow was the 1.9% month-over-month surge in excluding auto sales, which more than doubled the Bay Street consensus forecast of 0.8% gain, noted Rosenberg Research. In real, or volume terms, sales also bounced by 1.5% month over month in the best reading of the year.

The hand off to real retail sales growth is over a decent 2% annual rate, so those at the Bank of Canada lately commenting over the "resilience" of the local economy look to have been fairly prescient, notwithstanding the "soggy" labor market. That said, it should be acknowledged that there was a fly-in-the-ointment in that Statistics Canada's flash estimate for July shows a 0.8% monht-over-month giveback, added Rosenberg.

It wasn't just the magnitude of the June rebound but the breadth that really stood out in this report -- only 5% of the time in the past (data back to 2017) have all the major retail sector subsectors risen in tandem, so June served up a very rare result.

The housing market may be starting to show a pulse because the real estate-related items posted impressive gains in real terms -- as in, a 2.7% month-over-month surge in building materials on top of a +3.6% run-up in May and a 0.4% recovery in furniture and appliances.

Apparel retailers enjoyed their best month in three years via a 4.8% month-over-month spike. General merchandisers rang in a hefty 1.5% jump in sales receipts. The aisles at the grocery chains were filled, with the strong 2.3% rebound that terminated a three-month string of declines.

Sporting goods, among the most discretionary of all the retail groups, rang in a 1.3% sales expansion and is riding a three-month winning streak. Autos/parts (+0.2%) and gasoline (+2.7%) showed the effects of the "travel at home" theme.

The drug stores weren't to be left out, recovering 0.5% month over month after two months of losses. Not just drug stores but drugs that go beyond medicinal purposes because cannabis stores posted a "high" 1.3% advance and is up sharply for five months in a row.

A BoC seemingly consumed with inflation concerns -- rather unnecessarily in Rosenberg's view) -- should be comforted by the fact that the retail price deflator came in as flat as a beavertail and this followed outright deflation in three of the prior four months. In the first half of 2025, retail sector prices have shown almost no change at all and that compares with a 1.2% annual rate this time last year.

Governor Tiff Macklem and the rest of the crew at the central bank should actually be breathing easier since it is clear in this data release that inflation, at least as it pertains in the broad retail sector, is a non-event -- tariffs or not, according to Rosenberg.

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