Car Purchases Lead 3rd-Straight Gain in Canada Retail Sales

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Canada’s retail sales rose for a third month in July as families spent more on cars and clothes, supporting the view economic growth is on pace for a third-quarter rebound.

Receipts increased 0.5 percent to a record C$43.3 billion ($32.7 billion), Statistics Canada said Wednesday in Ottawa, following a June increase the agency revised lower to 0.4 percent, from 0.6 percent initially.

New car sales rose 2.7 percent to C$8.83 billion in July, the sixth-consecutive gain and the largest since September. Clothing was the other major contributor to the total sales increase, up 2.5 percent.

“When you add it up with the other indicators we saw for July, it’s probably another month of positive growth,” said Robert Kavcic, a Bank of Montreal senior economist in Toronto.

Job gains, cheaper gasoline, low interest rates and tax cuts are keeping retail sales humming along this year. Spending on big-ticket items like cars and houses is holding up, even as households take on record debt loads, and lower commodity prices threaten incomes in provinces such as Alberta and Newfoundland.

Canada’s economy grew for the first time in six months in June as the damage from the oil shock eased. The retailing data show the uneven prospects across provinces, with sales in manufacturing-heavy Ontario up by 4.6 percent from a year ago, and Alberta sales down 3.7 percent.

‘Big Wedge’

“You are seeing a pretty big wedge between the strong regions and the weak regions,” Kavcic said by telephone.

Canada’s dollar was little changed after the report, with the currency at C$1.3288 per U.S. dollar at 9:44 a.m. Toronto time. The currency has depreciated by 12.5 percent this year.

Excluding motor vehicles and parts, sales were little changed in July, compared with the median prediction in a Bloomberg survey for a 0.5 percent increase. Spending fell 1.7 percent at electronics and appliance outlets, 1.6 percent at home furnishing stores, and 0.7 percent at building material and garden supply dealers.

The volume of sales rose 0.2 percent in July. That measure excludes the effects of price changes and more closely reflects the industry’s contribution to economic growth.

Sales in July were 1.8 percent higher than a year earlier, Statistics Canada said.

“We continue to see third-quarter growth showing a firm rebound from the disappointment observed through the first half of the year,” said David Tulk, chief Canada macro strategist at Toronto-Dominion Bank’s TD Securities unit. Tulk predicts third-quarter growth at a pace of between 2.2 percent and 2.5 percent.

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