Retail sales in Canada fell in June, widely missing expectations of a small gain as increasingly cautious shoppers pulled back on a number of fronts and overnight trips to the U.S. hit a record high as higher duty-free exemptions kicked in.
Statistics Canada reported Wednesday seasonally adjusted retail sales declined 0.4 per cent to $38.7 billion in June from the month earlier, more than offsetting a gain in May and frustrating economists who had expected a 0.1 per cent increase.
The biggest declines were felt by retailers who sell general merchandise, gasoline, building materials and garden equipment.
"The surprise drop in June sales was broadbased, suggesting households are becoming a little more cautious, though cross-border shopping may have played a role as well," BMO Capital Markets senior economist Benjamin Reitzes said. "Indeed, overnight visitors to the U.S. travelling by car hit a two-decade high in the month," Reitzes noted.
Canadians made a record 1.9 million overnight trips to the U.S. in June, and most overnight travel was by car, with Canadians taking more than 1.2 million trips - a 10 per cent increase month over month.
As of June 1, crossborder shoppers on an overnight trip are allowed to declare $200 worth of purchased goods. Before they were only allowed $50. For people on a jaunt of between two and seven days, the limit has doubled to $800 from $400.
Meanwhile, Reitzes said the "constant haranguing" by policy-makers urging households to borrow more cautiously, along with slowing job growth, also likely prompted some restraint.
Of the 11 subsectors that Statistics Canada tracks, seven of them reported lower sales - representing 64 per cent of the country's retail trade.
Statistics Canada said receipts at general merchandise stores fell by 1.05 per cent.
