Canada Retail Sales Rose 0.7% in May on Automobile Record

Canadian retail sales rose a second month in May as automobile purchases rose to a record and a late spring boosted traffic at building material and gardening stores.

Sales increased 0.7 percent to C$42.0 billion ($39.2 billion), Statistics Canada said today in Ottawa, faster than the 0.6 percent median forecast in a Bloomberg economist survey with 16 responses.

Motor vehicle and parts sales increased 2.5 percent to C$10 billion in May, with dealers reporting a 2.3 percent increase in new car receipts, which follows a rise of 3.5 percent in April, the agency said. Light trucks led record sales of 197,740 vehicles.

Consumer spending on big-ticket items remains strong even as policy makers continue to warn about record debt loads that may put some households at risk when interest rates rise. Today’s report suggests second-quarter economic growth has rebounded from a first-quarter pace of 1.2 percent, the kind of performance that led the central bank to say last week that it will take two years to reach full output.

“Canada’s second quarter upswing is a sign that the Canadian economy was not nearly as weak as the winter’s data suggested,” Bill Adams, a senior international economist at PNC Financial Services Group in Pittsburgh, wrote in a note to clients today.

Home Furnishings

Sales increased 3.7 percent at furniture and home furnishing stores, Statistics Canada reported. That follows realtor data this month showing home sales reaching a four-year high. Today’s rise in retail sales, and other recent gains in manufacturing and wholesaling suggest a second-quarter growth rate of at least 2.5 percent, said David Tulk, chief Canada macro strategist at Toronto-Dominion Bank’s TD Securities unit.

Canada’s dollar was little changed at C$1.0735 per U.S. dollar at 9:55 a.m. Toronto time.

Purchases excluding the motor vehicle and parts category increased 0.1 percent, while economists had forecast a 0.3 percent rise.

Sales advanced in seven of 11 categories marking 56 percent of total sales, including a 2.0 percent increase at gasoline stations. Electronics- and appliance-store sales fell 1.7 percent in May, following four increases.

Building material and garden supply sales rose 3.5 percent to C$2.34 billion, after a delayed start to spring, Statistics Canada said.

April’s retail sales increase was revised to 1.3 percent from an earlier estimate of 1.1 percent.

The volume of sales for May rose 0.4 percent. That measure excludes the effects of price changes and more closely reflects the industry’s contribution to economic growth.

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