Canada May Be Set for Growth Spurt after July Retail BounceWednesday, September 25, 2013 > 10:08:50
(Reuters – Louise Egan)
Canadian retail sales rose a solid 0.6% in July, making up for losses in June and setting up the economy to show firm growth in the month and in the third quarter after a recent rough patch. Sales growth was pumped largely by gasoline stations, where both prices and volumes rose, according to a Statistics Canada report on Tuesday.
In volume terms, retail sales rose 0.5% in the month.
The July rebound matched the median forecast in a Reuters poll. Analysts had foreseen a bounce-back after sales slumped by 0.6% in June, hit partly by severe floods in Alberta and a two-week strike by construction workers in Quebec.
Canada's economy looks set to speed up after annualized growth slowed to 1.7% in the second quarter from 2.2% in the first, and gross domestic product in the month of June actually shrank 0.5%.
RBC Economics economist Nathan Janzen sees July GDP growth at a solid 0.7%. "In turn, the strength in July GDP would be consistent with our expectation that GDP growth in the third quarter rebounded to a 3.4 (annualized)% rate," he wrote in a note to clients.
Mazen Issa, an economist at TD Securities, sees third quarter growth of just below 2%.
Both estimates are below the Bank of Canada's latest projection of 3.8% expansion in the third quarter. But the second quarter turned out to be stronger than the central bank's 1.0% estimate, so overall the performance over the two quarters may not substantially change its outlook.
"The Bank of Canada will look through the volatility in the data, and over the latter half of the year we see the economy straddling its trend rate of growth owing to a slightly softer consumer spending profile (around 2%) and a slow rotation to exports and investment," Issa said. The Bank of Canada is expected to hold its key interest rate steady until late 2014.
Gains were reported in eight of the 11 retail subsectors tracked by Statistics Canada in July, representing 52% of total retail activity. Gasoline stations had the biggest jump in sales, up 3.2% due to higher prices and volumes. General merchandise stores, clothing retailers and health and personal-care stores also posted significant gains.
Canadians bought fewer new cars in July, however, pushing down overall sales of motor vehicles and parts by 0.6% after six straight months of gains. Supermarket sales also weakened, resulting in a 0.3% drop in receipts at food and beverage stores.
Stripping out sales by motor vehicles and parts dealers, retail sales rose by 1.0%. Excluding autos and gasoline, sales were up 0.6%.
Overall retail sales were 3% higher than in July 2012.