A Springtime Economic Snapshot of the Anglosphere

From the Pacific to the North Atlantic, retail sales data we reviewed from New Zealand to Canada and on to Britain show the anglosphere’s economies are holding up. Here are some takeaways—both tariff and non-tariff-related—about the latest figures from the UK, Canada and New Zealand.

Sun’s Out, Wallets Out in the UK?

UK retail sales volumes (which reflect the quantity bought) rose 1.2% m/m in April, the fourth straight month of growth and far above analysts’ consensus forecast of -0.6% contraction.^[i] Five of seven sectors expanded, led by food stores (3.9% m/m)—which retailers credited to the sunniest and third-warmest April on record.^[ii] The detractors were “other non-food stores” (e.g., computer, sports equipment and cosmetics stores), where sales fell -3.1% m/m, and clothing stores (-1.8%).^[iii] However, some coverage we read cited how clothing stores’ dip reflected seasonal adjustment quirkiness due to the timing of the Easter holiday and pointed out spending rose on a year-over-year basis—implying shoppers did spend on new springtime threads.^[iv]

It is possible weather and seasonal adjustments affect these April data. That being said, when you see four straight months of growth—which analysts whose work we follow largely dismiss as tariff frontrunning, warm weather, statistical quirks or temporary blips—a picture of sentiment that looks detached from reality starts to emerge, in our view. If we continue seeing sales volumes notch growth, those fleeting uptick interpretations are going to start looking a lot like monetary policy institutions’ forecasts of “transitory inflation” from 2022—but a positive surprise in this case.^[v] 

Beyond this, we have observed other analysts argue an uptick in April inflation along with slowing wage growth and weakening consumer confidence are headwinds to sales—though most expect growth this year, and weak confidence worldwide hasn’t correlated with falling sales.^[vi] Whilst we think it is worth monitoring how sentiment evolves from here, this narrow indicator of consumer spending points positively, outshining lingering inflation worries and fears of the recent tax hike’s punch.

A Budding Recession in Canada?

According to Statistics Canada’s advance estimate for April, retail sales grew 0.5% m/m, building on March’s 0.8% in value terms (and 0.9% in volumes).^[vii] Six of nine subsectors grew, with motor vehicle and parts sales jumping most (4.8% m/m)—the industry’s first positive reading in three months.^[viii] We noticed some observers pin March’s pop to Canadian consumers’ frontrunning tariffs. We agree some of that probably occurred, a theme borne out in ^{other nations’ economic data}. However, core retail sales (which exclude volatile motor vehicle and petrol station sales) rose 0.2% m/m, so March’s growth isn’t solely due to autos, in our view.^[ix]

Against that backdrop, we read some experts who think the country is already in recession (a broad, usually lasting decline in economic activity). Economists surveyed by Bloomberg estimated Canadian gross domestic product (GDP, a government-produced measure of economic output) will contract -1.0% annualised this quarter and -0.1% in Q3—which would meet a popular criteria of a technical recession (two or more consecutive quarterly GDP contractions).^[x] Their forecast presumes US President Donald Trump’s uncertainty-sowing trade policy has discouraged businesses and consumers from spending, knocking economic activity.

We don’t dismiss the possibility of an economic downturn in Canada. But two quarterly GDP contractions alone don’t make a recession, based on our research. We have found this definition to be popular amongst financial journalists, but it is vastly oversimplified, in our view, and doesn’t take into account the scale of the downturn. Moreover, even one contractionary quarter (if Canada actually sees that—it hasn’t yet) doesn’t mean recession has begun.^[xi] For example, US GDP contracted -0.3% annualised in Q1, yet our review of the underlying private-sector components indicates underlying strength.

Unpredictable trade policy may yet make a turn for the worse, driving a downturn in the Great White North. But we think the latest retail sales data largely push back against that story. And common forecasts of recession hint at the potential for positive surprise.

Strong Q1 Retail Sales in New Zealand 

New Zealand’s retail sales rose 0.8% q/q, with 10 of 15 industries rising.^[xii] Like Canada, motor vehicle sales were a big contributor (3.5% q/q).^[xiii] And, similar to its North American commonwealth brethren, New Zealand’s core retail sales, which exclude autos and fuel, rose 0.4% q/q—implying the strong Q1 wasn’t due only to tariff frontrunning, in our view.^[xiv]

The Kiwi government recently warned tariffs would slow global economic growth, hitting New Zealand’s economy hard.^[xv] Perhaps. The US did become the second-largest export destination for Kiwi goods last year (NZ$ 9.0 billion [£4.0 billion], about 12% of New Zealand’s goods exports), a reflection of American demand for NZ meat and dairy.^[xvi]

But although trade ties with America have grown in recent years, New Zealand’s neighbors haven’t gone anywhere. 2024 goods exports to Australia were NZ$8.8 billion (£3.9 billion), just a smidge behind the US.^[xvii] Meanwhile, Kiwi exports to its biggest trading partner China were worth NZ$17.8 billion (£7.9 billion), almost double America’s share.^[xviii] In terms of New Zealand’s imports, America ranked third in 2024: behind China and Australia and slightly ahead of South Korea.^[xix] America is an important trade partner for New Zealand, no doubt. But it isn’t the most economically consequential. In our view, NZ’s prospects likely depend more on trade with its regional neighbors and domestic demand. Tariffs from America only encourage more of that, in our opinion. If domestic consumption remains healthy like Q1’s, the Kiwi economy could prove more resilient than feared, too.