Retail Sales in Canada Show Growth

By Fergal Smith
Toronto (Reuters) – Canadian retail sales grew by 0.9% in July from June, led by higher sales at motor vehicle and parts dealers. Sales likely climbed further in August, according to data from Statistics Canada released on Friday.

The increase in retail sales to C$66.4 billion ($49.0 billion) surpassed estimates of 0.6%, easing concerns about the domestic economy’s strength.

Sales rose in seven of nine subsectors, accounting for 84.6% of retail trade, with motor vehicle and parts sales climbing 2.2%. In volume terms, retail sales increased by 1.0%.

Olivia Cross, North America economist at Capital Economics, noted that the increase in retail sales volumes in July would likely be welcomed by the Bank of Canada, which has been cautious about potential economic downturns.

The Bank of Canada has reduced interest rates three times since June and indicated it might shift to larger cuts if necessary for economic support.

Market data showed the likelihood of a half-percentage-point move in October slightly decreased to 56% from 59% after the retail sales report.

Core retail sales, excluding gasoline stations and motor vehicle and parts dealers, rose 0.6%, marking their second consecutive monthly increase. This growth was driven primarily by food, beverage, and general merchandise retailers.

A preliminary estimate suggested sales would increase by 0.5% in August.

However, Katherine Judge, a senior economist at CIBC Capital Markets, mentioned that per-capita sales still seem weak, and declining labor market conditions indicate potential decreases in discretionary consumption.

Canada has experienced historically high population growth recently.

The Canadian dollar remained steady at 1.3560 per U.S. dollar, equivalent to 73.75 U.S. cents.