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Canada July Retail Sales Unexpectedly Decline 0.1%

Sept. 22 (Bloomberg) -- Canadian retail sales unexpectedly fell in July as consumers cut purchases of furniture, appliances and electronics.

Sales declined 0.1 percent to C$35.9 billion ($35 billion), the third drop in four months, Statistics Canada said today in Ottawa. Economists surveyed by Bloomberg anticipated a 0.6 percent gain, according to the median of 15 estimates. Sales in volume terms fell 0.2 percent.

After increasing the central bank’s overnight target rate for a third time to 1 percent on Sept. 8, Bank of Canada Governor Mark Carney said the economic recovery will be “slightly more gradual” than the bank expected when it released its last prediction in July. The central bank had predicted the economy would expand at a 2.8 percent pace in the third quarter.

“Canada’s going through a bit of a soft patch right now, something the U.S. also experienced during the summer,” said Rudy Narvas, a senior economist with Societe Generale SA in New York. The drop “dampens expectations for another 25 basis point rate hike in October.”

Narvas said “underlying fundamentals” suggest the disappointing data is temporary and other parts of the economy, such as investment in machinery and equipment, point to stronger growth. He expects the bank will raise rates a quarter point either in October or December.

Furniture Drop

July’s retail sales drop was led by an 8.4 percent decline in sales at furniture and home furnishing stores and a 4.9 percent drop at electronics and appliance stores. Five of the measurement’s 11 components posted lower sales, the agency said.

Sales at gasoline stations were up 0.7 percent, and motor vehicle and parts dealers recorded a 1 percent gain.

Excluding car and parts dealers, retail sales fell 0.4 percent to C$28 billion, compared with the 0.4 percent increase expected by economists. Sales excluding the automotive industry and gasoline stations fell 0.5 percent.

The statistics agency also said June’s retail sales were unchanged from May, revising the 0.1 percent gain initially reported.

In a separate release, Statistics Canada said the country’s index of leading economic indicators advanced in August for a 15th straight month, as new orders for manufactured durable goods gained 5.2 percent and sales of durable goods other than furniture and appliances rose 1 percent.

The index rose 0.5 percent in August, faster than the 0.4 percent gain during the previous month, Statistics Canada said. Economists surveyed by Bloomberg News said the index would rise 0.3 percent, based on the median of eight estimates.

To contact the reporter on this story: Alexandre Deslongchamps in Ottawa at adeslongcham@bloomberg.net.

To contact the editor responsible for this story: Christopher Wellisz at cwellisz@bloomberg.net

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