Soft Canadian retail sales data point to slowing economy

OTTAWA, July 21 (Reuters): Canadian retail sales underperformed expectations in May and were likely unchanged in June, data showed on Friday, pointing toward a slowdown in economic growth that would allow the Bank of Canada to leave interest rates unchanged.

Sales rose 0.2 per cent in May from April, less than the 0.5 per cent increase forecast by analysts in a Reuters survey. The rise was led by increases at motor vehicle and parts dealers as well as food and beverage retailers, according to Statistics Canada.

Sales were up in five of nine subsectors, representing 94.5 per cent of retail trade. In volume terms, retail sales increased 0.1 per cent.

"This data suggests that the economy is slowing in line with the Bank of Canada's forecasts," Tiago Figueiredo, an economist at Desjardins, said in a note. "As such, Canadian central bankers will view this as part of the process and will likely not see the need to raise rates further this year."