Another reason why the Bank of Canada is likely to cut rates this month

Next week's Bank of Canada rate decision is a big one.

The market is pricing in a 76% chance of a rate cut, which is a contract high and has been steadily creeping up. Recent data has been slipping and the housing market is suffering.

Critically, this could be the second-consecutive cut and could signal a cadence of cutting every meeting, though with 4 meetings left this year the market is pricing in 63 bps in easing.

Consumers will have a big say in where rates are headed and the latest credit card data from RBC shows real retail sales falling in June.

"On a per capita basis, real spending on consumer goods declined for the first time since Q3 last year, and we don’t expect a turnaround in the near term," the report released Thursday said.

Softness came from autos as well as essentials. Spending on home goods and building materials fell for the second month as well. Perhaps most-worrying were drops in spending on restaurants and hotels.

"Tourism demand is still sitting below pre-pandemic levels," RBC notes.

• Discretionary services 114.5 vs 115.7 prior
• Discretionary goods 98.5 vs 101.4 prior
• Essentials 107.6 vs 112.9 prior