Cha-ching! Retail sales in Canada rose in August

October 25, 2011  |  Canadian Press  |  Comments

Retail sales in Canada rose a better-than-expected 0.5 per cent to $37.8 billion in August, suggesting that Canadian consumers have pretty much shrugged off a period of severe turbulence on financial markets.

Gains were reported in six of 11 subsectors representing 70 per cent of retail sales, Statistics Canada said Tuesday, largely offsetting a July decline of 0.5 per cent. The increase was led by higher sales at gasoline stations and motor vehicle and parts dealers.

The August numbers were “admirable given the headwinds that included a plunging stock market and drop in consumer confidence to the lowest level in two years,” BMO Financial economist Robert Kavcic wrote in a note to clients.

“Consumer spending growth has cooled in Canada, but held up relatively well in August despite a significant blow to consumer confidence — there are still supports from extremely low interest rates and a healthy job market. With all of the August data now in, the Canadian economy looks to have posted modest growth in the month, and should do so for all of Q3 as well,” he wrote.

By volume, sales rose 0.3 per cent overall. The biggest single gain was at gas stations, where sales were up 1.9 per cent. The one per cent increase in sales of motor vehicles and parts was due mainly to higher new car sales and improved sales of RVs, motorcycles and boats.

The “respectable” gain “suggests that most households shrugged off the recent volatility in financial markets, despite evidence showing that confidence had fallen,” wrote David Madani of Capital Economics.

The retail results came as the Bank of Canada reported a somewhat less rosy outlook for economic growth for the full year, pegging annual growth at a very modest 2.1 per cent — down from a July forecast of 2.8 per cent. It predicted next year will be even weaker, with growth of 1.9 per cent.

However, the central bank also kept its key interest rate at an ultra-low one per cent, which should continue to stimulate retail sales as it keeps interest rates very affordable on consumer lines of credit and variable rate mortgages.

Among its other findings for August, Statistics Canada said food and beverage stores reported sales up 0.3 per cent for a third consecutive month of gains. Furniture and home furnishing stores registered a 1.6 per gain, largely offsetting a decline in July.

Retail sales rose in eight provinces in August, with the largest gain in dollar terms coming in Ontario, where sales were up 0.9 per cent. This was the fourth increase in five months.

Sales in Quebec were essentially unchanged between July and August.

The only provincial sales declines came in Nova Scotia (-2.3 per cent) and Prince Edward Island (-1.1 per cent).

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