Canadian retail sales rose to a record in May led by new automobile dealers, a rare sign of optimism after weeks of evidence the economy shrank through the first half of the year.
Sales increased 1 percent from the prior month to C$43 billion ($33.1 billion), Statistics Canada said Thursday in Ottawa. The rise exceeded all 18 forecasts in a Bloomberg News economist survey with a median of 0.6 percent.
Consumer spending remains the key driver of the world’s 11th largest economy, where lower energy prices have derailed exports and business investment. The Bank of Canada cut interest rates for the second time this year on July 15, and Thursday’s report won’t undo other signs that output shrank again in the second quarter, economists said.
“Despite the oil shock people are spending,” said Krishen Rangasamy, senior economist at National Bank Financial in Montreal. “It doesn’t change the weakness elsewhere.”
Canada will still probably report output fell for a fifth straight month on July 31, he said. The country’s dollar on Thursday remained close to 2004 lows set on Wednesday, and was up 0.3 percent to C$1.3000 per U.S. dollar at 10:09 a.m. Toronto time.
Sales rose in nine of 11 major categories representing 92 percent of total receipts. After adjusting for price changes the volume of sales rose 0.4 percent.
New car sales rose for a fourth straight month, increasing 2 percent to C$8.6 billion. Sales of used cars dropped 1.2 percent.
Gasoline stations reported a 1.9 percent increase in sales. Electronic and appliance store receipts rose 6.1 percent and at building material and garden supply stores they gained 1.9 percent.
“While not a big upside surprise, the mildly encouraging retail results break a run of sour news for the Canadian economy,” Doug Porter, chief economist at BMO Capital Markets in Toronto, wrote in a note to clients. “The decent result also plays up the fact that the consumer is still doing its job --- now the economy needs some serious help from non-resource exports.”
In a separate release, Statistics Canada reported a 10.4 percent increase in the number of jobless benefits beneficiaries in Alberta, another sign of the damage from last year’s plunge in crude oil prices. Nationwide, beneficiaries increased 0.9 percent. Unemployment insurance recipients in the western province have increased for seven consecutive months and have climbed by 61.3 percent since May 2014.
The Bank of Canada reduced its 2015 gross domestic product forecast by almost half to 1.1 percent last week, and cut its key interest rate to 0.5 percent, the second downward move this year. It blamed the weakness on damage from an oil-price shock and the “puzzling” lack of a rebound in non-energy exports.