Lower dollar to impede Canadian retail sales growth

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While it is widely believed that lowered gas prices will allow for Canadians to spend money elsewhere, a lower Canadian dollar—one effect of decreased oil prices—may mean otherwise.

According to a report from TD Economics, the lowered dollar will boost the price of imported goods, largely offsetting any gains from cheaper gas. Because of this, the company has forecasted a fairly steep decline in retail sales growth this year, projecting a decrease from 4.6 per cent in 2014 to 2.9 per cent this year.

Moody’s, a bond rating firm, also believes that the lower gas prices won’t promote consumer spending in other sectors. “Given Canada’s reliance on the oil industry, sustained low oil prices will lead to more layoffs,” said a report from the firm. “[This] could further dampen consumer confidence and spending.”

TD cautions that overall retail sales numbers will vary considerably due to the volatility of gasoline sales. Sales levels in other retail sectors will be more stable, it says. CJ

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