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Canada May Retail Sales Gain Fastest in 3 Years on Autos

Canadian retail sales rose at the fastest pace in three years in May on gains in almost every category, led by automobiles.

Sales increased 1.9 percent to a record C$40.4 billion ($39.1 billion), Statistics Canada said today in Ottawa. The gain was almost double the highest forecast in a Bloomberg survey of 20 economists, which had a median forecast of 0.4 percent.

The gain in retail sales follows other signs of resilience in consumer spending such as stronger home construction, which counter warnings by policy makers about the threat posed by record household debt loads. Bank of Canada Governor Stephen Poloz said last week there are signs of a “constructive evolution” in household finances and has said the expansion must rotate to one led by exports and business investment.

Canada’s second-quarter gross domestic product growth will probably feature “a heavy pull by consumers after a dull first quarter,” said Jimmy Jean, a strategist in the fixed-income group at Desjardins Capital Markets in Montreal. The economy probably grew at 2.2 percent annualized second quarter pace, faster than the Bank of Canada’s 1 percent prediction, even with flooding in Alberta slowing output, he said.

The Canadian dollar increased 0.2 percent to C$1.0310 per U.S. dollar in Toronto as of 9:26 a.m. in Toronto, after earlier reaching C$1.0299, the strongest since June 20. One loonie buys 96.99 U.S. cents.

Sales advanced in nine of 11 categories accounting for 94 percent of total receipts. Motor vehicle and parts sales, the largest category, rose 4.3 percent to C$9.51 billion, the fastest gain in almost two years.

Ex-auto Gains

Purchases excluding the motor vehicle and parts category gained 1.2 percent, exceeding the 0.4 percent increase economists had forecast.

The later-than-usual start of National Hockey League playoffs helped boost beer, wine and liquor store sales by 2.2 percent in May, while a late start to spring raised sales at garden equipment and building supply stores by 3.7 percent.

The volume of sales also rose 1.9 percent. That measure excludes the effects of price changes and more closely reflects the industry’s contribution to economic growth.

Sales in May were 3.6 percent higher than a year earlier, Statistics Canada said.

Household consumption probably grew at a 2 percent annualized pace in the second quarter, ahead of the 1.6 percent pace of total output growth, according to a Bloomberg economist survey taken July 5 to July 10.

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

To contact the editors responsible for this story: Chris Wellisz at cwellisz@bloomberg.net; David Scanlan at dscanlan@bloomberg.net

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