Morning Market Brief: Thursday, June 22, 2023

Canadians turn back to their spending ways?

Statistics Canada reported that Canadian retail sales increased in April, the first increase in three months. The Canadian consumer’s relative resilience despite tighter financial conditions is helping prop up the Canadian economy. Undoubtedly, the Bank of Canada (BoC) is closely monitoring the impact its return to raising interest rates will have on Canadian households and businesses.?

• Retail sales in Canada rose by 1.1% in April over March, which marked its first monthly increase since January 2023. The rise topped the 0.4% increase economists estimated in a Bloomberg survey. In March, retail sales dropped by 1.5%.?
• Stronger sales over the month were recorded in several key categories. Sales advanced at general merchandise stores, clothing and accessories retailers, and at motor vehicle and parts dealers.
• Canada’s economy expanded at a stronger-than-expected pace in the first quarter of 2023, largely due to stronger household spending. The Canadian consumer has proven relatively resilient despite high inflation and rising interest rates. A strong labour market combined with high savings rate has largely offset the impact of tighter financial conditions.
• The BoC returned to raising interest rates at its June meeting. With a relatively strong consumer, the BoC is hoping its additional rate hike can help mute demand, which may put downward pressure on elevated inflationary pressures.

The health of the Canadian consumer reveals the relative strength of Canada’s economy, whereas some economies globally have not necessarily been as fortunate. While we often speak about the benefits of investing globally, it is also important to invest in Canada, where there are many successful companies. With respect to consumer stocks, the consumer staples and consumer discretionary sectors have provided positive returns this year to the end of May despite volatile conditions. When spending slows or falls, the consumer discretionary sector, in particular, may come under pressure.

At?CIBC Private Wealth, we aim to take a comprehensive approach to managing, building and protecting your wealth. If you'd like to discuss this market and economic update in more detail, please get in touch with your advisor any time.