Canadian retail sales came in on the weak side in March, solidifying calls for a 50 basis point cut a week from now.

Canadian retail sales came in a little below expected in March, up 0.3%. Sales for big-ticket items, such as cars and furniture, were strong, while food and gasoline sales declined. Ex-auto sales were unchanged in the month, well below consensus expectations.

But BMO Nesbitt Burns cautions against reading the report as grim. It notes, “The headline results were a bit below expected, but today’s retail report suggests that Canadian consumers are still doing their part to support growth. In volume terms, sales rose a solid 0.3% in March, and are up at a firm 3% pace from a year ago. In the first quarter, sales rose at a robust 4.7% annual rate in real terms. This lends more weight to the view that overall GDP posted growth of around 2% in Q1.”

Today’s retail sales report was the last big number out before next Tuesday’s rate announcement from the Bank of Canada. The expectation is that the central bank will cut rates by 50 bps, with some analysts leaning toward a more moderate 25 bps cut.

The weaker retail sales shouldn’t derail plans for a larger cut. RBC DS economists say, “There was nothing in this report to alter our view of a final 50 bps cut on May 29.”

RBC DS notes that “Retail sales advanced by a solid 1.1% quarter over quarter in Q1, a much improved performance from the meagre 0.1% quarter over quarter gain in Q4. As anticipated, the consumer will be the main driver of GDP growth in Q1, offsetting weakness in business investment and inventory and underpinning growth of 1.5% – 2%.”