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Canada July Retail-Sales Rebound Boosts Recovery Argument

Canada retailers boosted sales in July, reversing a drop a month earlier and adding to evidence the nation’s economy has rebounded from a slowdown.

Sales rose 0.6 percent to C$40.3 billion ($39.1 billion), following a similar decline in June, Statistics Canada said today in Ottawa. Today’s figure follows July gains of 1.5 percent for wholesale sales, 1.7 percent for manufacturers and a 20.7 percent surge in building permits.

Canada suffered its biggest monthly contraction since the recession in June when the economy shrank 0.5 percent, due in part to the impact of flooding in Alberta and a construction strike in Quebec. The nation’s output is poised to accelerate at a 2.1 percent pace from July to September, after slowing to 1.7 percent in the second quarter, according to Bloomberg economist surveys.

“That weakness in June even outside of the temporary disruptions was overstated,” said Nathan Janzen, an economist at Royal Bank of Canada, by telephone from Toronto. “The bounceback implies activity is on a stronger path than what was implied by the June data alone.”

Growth will expand 0.7 percent in July and an annualized 3.4 percent pace in the third quarter, Janzen predicts.

Today’s data is the last major release before July’s economic growth report on Sept. 30, and indicates GDP expanded 0.5 percent that month, Robert Kavcic, senior economist in Toronto at Bank of Montreal, said in a note to clients.

Tipping Point

The median forecast in a Bloomberg News survey of 22 economists was for a 0.5 percent gain in retail sales. From a year earlier, sales were up 3.0 percent.

Canada’s economy has been relying on consumers to drive growth, as the nation waits for faster global demand to fuel exports and business investment. Bank of Canada Governor Stephen Poloz said last week growing confidence about global demand has brought the economy to a “tipping point.”

Sales in July were led by a 3.2 percent increase at gasoline stations. Clothing and accessory stores posted a 1.9 percent gain and home furnishing retailers boosted receipts by 1.6 percent. Sales rose in eight of 11 categories making up 52 percent of total receipts.

Motor vehicle and parts sales fell for the first time in seven months, posting a 0.6 percent drop in July. Purchases excluding the motor vehicle and parts category rose 1.0 percent. Economists had forecast a 0.6 percent gain in ex-auto sales.

The volume of sales, which excludes price changes and more closely reflects the industry’s contribution to growth, rose 0.5 percent in July.

Retailers in Ontario, the country’s largest province, led gains with a 1.5 percent increase in July, followed by Quebec’s 1.3 percent rise. Manitoba, which raised its provincial sales tax on July 1, recorded a 4.1 percent decline.

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