Canadian consumer spending sharply rebounded last month, according to preliminary data, after weaker-than-expected retail sales in the first quarter.

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Canada's retail sales jump 0.7% in April after weak first quarter Back to video

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Receipts for retailers jumped 0.7 per cent in April, the fastest pace since September, according to the advance estimate from Statistics Canada released Friday. That followed a 0.2 per cent drop in March, below expectations for a 0.1 per cent decline in a Bloomberg survey and the statistics agency’s estimate for a flat reading.

With a larger-than-forecast decline in March, retail sales were down 0.2 per cent overall in the first quarter. Despite the April bounce, retail sales are still below levels seen in December.

Receipts at motor vehicle and parts dealers grew 1 per cent, the largest increase in the retail sales data and up for a second straight month. New car sales are up $810 million since last March, accounting for the biggest share of this year’s increase in retail sales.

Excluding autos, receipts fell 0.6 per cent, far lower than expectations for a 0.3 per cent increase.

Overall in March, the retail sales decline was led by decreases at furniture, electronics and appliances retailers. In volume terms, retail sales decreased 0.4 per cent.

“The waning of momentum over the quarter reflects consumer caution as mortgages come up for renewal at higher interest rates, and sales look even worse in per-capita terms, with volumes well below year-ago levels,” Katherine Judge, an economist at Canadian Imperial Bank of Commerce, said in a report to investors.

The advance estimate for April partly reflects higher gasoline prices, Judge added.

Charles St-Arnaud, chief economist at Alberta Central, said the estimate suggests some strength to start the second quarter, but it will likely prove temporary.

“Spending per person continued to trend lower, suggesting that individual households are reducing their spending and that the growth in consumer spending is only due to continued increase in population,” he said in an email.

Given the notable positive swing in April’s advance estimate, there is reason to believe that March’s reading could be negatively skewed due to an early Easter holiday, Maria Solovieva, an economist at Toronto-Dominion Bank, said in a report to investors.

“One way or another, we expect a further slowdown in consumer spending in the second quarter, giving the Bank of Canada plenty of reason to cut this summer,” she said.