Canada Retail Sales Tumble 2% in April, Drop 5 Times More Than Expected

Canadian retail sales in April fell more than forecast, reversing most of the previous month’s gain, on declines in new car and clothing receipts.

Sales fell 2 percent to C$36.2 billion ($35 billion), the biggest decline since December 2008, Statistics Canada said today in Ottawa. The drop exceeded the most pessimistic estimate in a Bloomberg survey of 17 economists, with the median forecast for a 0.4 percent fall.

Bank of Canada Deputy Governor Timothy Lane said yesterday economic growth should moderate this quarter after the economy expanded faster than expected. Consumer spending helped lead growth of 6.1 percent at an annualized pace in the January-March period, and the central bank raised its key interest rate to 0.5 percent on June 1 from a record low 0.25 percent to head off inflation pressures.

“There is a yellow flag here,” said Sebastien Lavoie, an economist at Laurentian Bank Securities in Montreal. “The economy is going through a phase of transition; growth is decelerating.”

The growth rate will probably slow to 2.5 percent this quarter, and the central bank will stick to quarter-point rate increases at its remaining meetings this year, Lavoie said.

The Canadian currency weakened 1.1 percent to C$1.0413 per U.S. dollar at 9:30 a.m. in Toronto, compared with C$1.0296 yesterday. One Canadian dollar buys 96.03 U.S. cents.

Cars Lead Decline

The retail sales decline was led by new car dealerships, where receipts fell 5.3 percent to C$6.1 billion.

Excluding car and parts dealers, retail sales fell 1.2 percent to C$28.5 billion. On that basis, economists predicted sales would be unchanged, according to the median of 17 estimates.

Sales excluding the automotive sector, which removes gasoline station sales as well as car and parts dealers, fell 1 percent to C$24.5 billion.

Clothing and accessories receipts dropped 5.2 percent to C$2.02 billion in April, after warm weather in March boosted sales, Statistics Canada said.

The agency also changed its March sales estimate to a 2.2 percent increase from the initial reading of 2.1 percent. Sales rose 6.6 percent in the 12 months ending in April.

To contact the reporter on this story: Greg Quinn in Ottawa at gquinn1@bloomberg.net.

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