Statistics Canada says retail sales rose 1.1 per cent to $65.9 billion in April as gains at general merchandise retailers and food and beverage stores led the way higher. A shopper carries purchases at Ottawa's Rideau Centre mall on Wednesday, Dec. 26, 2018. THE CANADIAN PRESS/Justin Tang

OTTAWA - Canadian retail sales came in stronger than initially estimated, as analysts say consumers proved resilient amid an economically challenging environment but that momentum is expected to slow.

Retail sales rose 1.1 per cent to $65.9 billion in April, Statistics Canada reported Wednesday, topping its initial estimate for the month that pointed to an increase of 0.2 per cent.

Gains at general merchandise retailers and food and beverage stores led the way higher.

The agency's advance estimate for May suggested a gain of 0.5 per cent for that month, though it cautioned the figure would be revised.

BMO economist Shelly Kaushik said the figures show Canadian consumers continued to spend but "higher prices drove most of the increase as spending volumes rose at a much slower pace."

In volume terms, retail sales rose 0.3 per cent for April.

"Looking ahead, momentum in consumer spending is expected to slow in the second half of the year, as yet higher interest rates and still-elevated inflation continue to weigh on purchasing power," Kaushik wrote in a report.

The Bank of Canada raised its policy interest rate by a quarter of a percentage point earlier this month to 4.75 per cent, a move that prompted the country's big banks to raise their prime rates.

The central bank has raised concerns that inflation seems to be more sticky than expected and will be harder to get it back down to its two per cent target.

Retail analyst Bruce Winder said he'd expected a decrease or minimal increase in April's retail sales figures.

"We all expected that the tide would turn just because there's so many headwinds," he said.

"You've got interest rates. Inflation, especially in food, is still high. You've got job loss in the tech sector, you've got a lot of things going against the consumer."

He also noted that consumers are at "an all-time high with household debt," especially following a period of high spending coming out of the pandemic.

"I thought for sure they would take a break. But it's something that we're seeing a bit of a surprising resilience in consumer spending," said Winder.

"Is it because credit is so easily available? Is it because consumers still have some of that revenge spending they want to do?"

Winder said it's possible the increase is also related to factors such as population growth, along with Canadians increasingly returning to office, prompting them to spend more on merchandise.

Statistics Canada said sales at general merchandise retailers rose 3.3 per cent in April, while food and beverage retailers saw a gain of 1.5 per cent.

Sales at motor vehicle and parts dealers gained 0.5 per cent in April, helped higher by a 3.7 per cent rise at used car dealers and a 3.5 per cent increase at automotive parts, accessories and tire retailers.

Sales at furniture, home furnishings, electronics and appliance retailers fell 1.6 per cent.

Core retail sales — which exclude gasoline stations and fuel vendors, and motor vehicle and parts dealers — gained 1.5 per cent in April.

This report by The Canadian Press was first published June 21, 2023.

News from © The Canadian Press, 2023