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Canada Retail Sales Fall First Time in Seven MonthsThursday, September 25, 2014 > 09:48:22
Canadian retail sales unexpectedly fell in July, dropping for the first time in seven months on lower receipts at general-merchandise stores.
Sales decreased 0.1 percent to C$42.5 billion ($38.6 billion), Statistics Canada said today in Ottawa. The decline matched the lowest estimate in a survey by Bloomberg News of 16 economists, which had a median forecast for a 0.5 percent increase.
Retail spending remains near last month’s record high after rising from a low of C$33.3 billion in December 2008. Future consumption may be crimped by near-record debt loads and sluggish job growth over the last year.
“Though auto-related spending continued its momentum, Canadians aren’t using their new cars to drive to the shopping mall,” Nick Exarhos, an economist in Toronto at CIBC World Markets, wrote in a note to clients today. “We’ve noted how a tapped out consumer would run out of gas after having dropped savings dramatically over the past several quarters, and July’s retail data may be a first signal of that.”
Receipts at general-merchandise stores, which include department stores and discount retailers, declined 2.7 percent to C$5.3 billion, while receipts at clothing and clothing accessories stores dropped 2.3 percent to C$2.3 billion.
Motor vehicle and parts sales rose 1.6 percent to C$10.2 billion. Purchases excluding the motor vehicle and parts category fell 0.6 percent. Economists had forecast they would be little changed.
Recent data indicate an increase in Canadian automobile production. A jump in auto exports pushed Canada’s merchandise trade balance to its biggest surplus in almost six years in July, Statistics Canada said Sept. 4.
Bank of Canada Senior Deputy Governor Carolyn Wilkins reiterated yesterday in a speech in Toronto that high household debt in Canada remains at the top of the list of risks to the nation’s financial stability. Credit-market debt such as mortgages rose to 163.6 percent of disposable income, from a revised 163.1 percent in the first quarter, Statistics Canada said this month.
The July report probably represents a “one-off” adjustment to strong sales in June rather than a “marked shift in the tone of consumer spending,” TD Securities rates strategist Mazen Issa said in a research note.
The Canadian dollar pared a gain of as much as 0.5 percent after the retail release, and was trading 0.1 percent stronger at C$1.1032 versus its U.S. counterpart at 10:19 a.m. in Toronto. One Canadian dollar, known as a loonie, buys 90.65 U.S. cents. The yield on two-year government bonds fell 2 basis points to 1.13 percent.
Sales declined in July in five of 11 categories marking 55 percent of total sales.
Retailers traditionally associated with housing purchases and home renovation continued to show strength in July, according to Statistics Canada, with furniture sales climbing 4.0 percent to C$1.4 billion.
The increase in June retail sales was revised to 1.2 percent from an earlier reading of 1.1 percent.
The volume of sales was little changed, Statistics Canada said. That measure excludes the effects of price changes and more closely reflects the industry’s contribution to economic growth.
Sales in July were 5.0 percent higher than a year earlier, Statistics Canada said.