Canadian retail sales came in weaker than expected for June, which should provide a push for further cuts to interest rates cuts.

“Looking over the list of dreary economic data out of Canada over the past two weeks, today’s retail sales report was no exception,” says BMO Nesbitt Burns. “Total retail sales were extremely disappointing, falling 0.3% in June, snapping a three-month winning streak, and well below consensus estimates.”

“Responding to growing fears of an economic slowdown, Canadians opted to pocket, not spend, their gasoline-price savings,” suggests CIBC World Markets. Most of the decline was attributable to a price-related 2.9% fall in gasoline station sales, and in fact, in real terms, retail sales were flat in June. The increases we anticipated in two categories with earlier reports (autos and general merchandise) were swamped by sharp declines in most other categories, leaving the June result well below expectations.”

The robust housing market helped boost furniture sales for the second month in a row, and general merchandisers enjoyed their biggest gain since the start of the year, notes BMO. Regionally, Alberta and Newfoundland were the sources of strength.

Looking beyond the month-to-month wiggles, sales in the second quarter posted still-impressive advances. Total sales surged at an annual rate of 8.7% in Q2, the biggest gain in a year. Significant gains in sales of autos, food, drugs, and clothing, contributed to this improvement.

CIBC warns that there are signals that the strength in consumers is dissipating. “Real retail sales rose 0.8% in Q2, down from a 1.3% rise in the first quarter. While that will still leave the consumer sector as an area of relative strength, providing some offset for poor exports, all of the second quarter’s gains were back in April. If the last two months are more indicative of the current trend, economic growth in Q3 will feel the hit from this loss of domestic demand momentum.”

Both BMO and CIBC say that this report should help give the Bank of Canada one last push to cut rates again. “[This report is] one more thought that the Bank of Canada will carry into its highly likely decision to match today’s expected 25 bps Fed rate cut,” says CIBC. “With June’s retail sales slump, real GDP was likely down in the month. Definitely nothing here to stop the Bank from trimming rates a further 25 basis points next Tuesday,” agrees BMO.