Thousands of shoppers attend the Premium Outlets grand opening in Milton, Ont.J.P. MOCZULSKI/The Globe and Mail
Flooding in Alberta and an increasingly cautious consumer have economists predicting that Statistics Canada will report weaker retail sales figures for June when the numbers come out Thursday.
But the pullback of 0.2 to 0.5 per cent that observers are predicting is really just payback for May, which saw retail sales jump 1.9 per cent in the month, said Dawn Desjardins, assistant chief economist at Royal Bank of Canada.
"You're still looking at second-quarter growth on the retail sales side that is quite robust," Ms. Desjardins said.
Auto sales, which have broken records recently, is one area that economists are predicting will come back to earth.
"I don't think the trend is necessarily down, but [Canadians] do have relatively cautious attitudes towards credit, and big-ticket items like autos are typically bought on credit," said Avery Shenfeld, chief economist for CIBC World Markets.
Just how much of an impact that the June flooding in southern Alberta will have is still a big question, Mr. Shenfeld said.
Economists were predicting that the flooding would take a big bite out of manufacturing sales in June, but when the numbers were released last week, Alberta actually posted a modest gain for the month.
But the Alberta floods are just one factor that has economists forecasting a pullback in June.
"I think retail numbers will underscore how weakly the economy performed in the month of June," said Derek Burleton, deputy chief economist with Toronto-Dominion Bank.
"I think from a broader perspective, we're still dealing with a consumer that's showing increased caution amid high debt levels," Mr. Burleton said. "Job growth has been following a much more subdued trend of late so I think the general tale here is there's still some caution that's persisting in the June numbers."
It's something that he said ties with his view on inflation numbers for July.
Mr. Burleton is forecasting headline inflation to tick up to 1.6 per cent for the month, driven by higher prices for electricity and clothes.
"We're still in a pretty low inflation environment, but one where I think we've seen the bottom," Mr. Burleton said.
However, with an economy that's still operating below it's potential, Mr. Burleton said he doesn't think that there is any danger of big inflation jumps in the near term.
Meanwhile, Mr. Shenfeld and Ms. Desjardins are both predicting July headline inflation to come in slightly lower at 1.4 per cent in July.
That puts it at the low end of the Bank of Canada's target of between 1 and 3 per cent, which neither economist thinks will spur any action from the bank.
"I think they still have time on both the inflation front, and in terms of slack in the Canadian economy, to sit on their hands in terms of thinking about eventual interest rate hikes," Mr. Shenfeld said.