© Reuters. FILE PHOTO: A person pushes a shopping cart through the produce section of a grocery store in Toronto, Ontario, Canada November 22, 2022. REUTERS/Carlos Osorio/File Photo

OTTAWA (Reuters) -Canadian retail sales dipped by 0.2% in February from January, and are expected to drop another 1.4% in March, according to data from Statistics Canada on Friday, indicating high interest rates may be starting to dent consumer spending.

February’s decline, smaller than analysts’ forecast of a 0.6% fall, was led by lower sales at gasoline stations and fuel vendors as well as and general merchandise retailers, Statscan said. By volume, retail sales decreased 0.7%.

The estimated 1.4% retails sales decline in March, which could change when data is released next month, would be the biggest drop in 8 months.

“The flash estimate suggests that consumers might be starting to feel the pinch from higher interest rates,” Desjardins economist Tiago Figueiredo said in a note.

“This reinforces the Bank of Canada’s (BoC) view that the Canadian economy is set to decelerate and shouldn’t require any further rate increases,” Figueiredo said.

The BoC raised rates at a record pace over the past year to cool inflation, and then became the first major central bank to pause monetary tightening. It has left its key policy rate at a 15-year high of 4.50% at its last two policy-setting meetings to let the effects of the hikes sink in.

In February, sales decreased in four of nine subsectors, representing 48% of retail trade.

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