Canada retail sales signal modest growth

Wed May 23, 2012 6:13pm EDT
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By Louise Egan

OTTAWA (Reuters) - Canadian retail sales bounced back in March after a weak February, but sales looked soft excluding the auto sector, and the figures sent mixed signals about first-quarter growth.

The 0.4 percent increase in retail sales, reported by Statistics Canada on Wednesday, showed consumers spent more after a weak start to the year, but did not quite resume their 2011 role as the main drivers of growth.

Prompted by unusually warm weather, Canadians bought more cars and recreational vehicles such as boats and motorcycles in March. They also invested in clothing, footwear, sporting goods and garden and building equipment.

The increase was a notch above the 0.3 percent gain forecast in a Reuters poll and followed a 0.2 percent decline in February.

But stripping out motor-vehicle and parts dealers, sales were up just 0.1 percent. Gasoline sales fell, to the surprise of analysts, and there were gains in just seven of the 11 sub-sectors that Statistics Canada tracks.

Analysts were heartened by the 0.4 percent rise in the retail sales volume, used to calculate gross domestic product.

"The volume gains should translate into decent support for March GDP, which is on track for a roughly 0.4 percent advance at this point," said Avery Shenfeld at CIBC World Markets.

Shenfeld sees first-quarter growth below 2 percent on an annualized basis, below the Bank of Canada's 2.5 percent estimate. But he said the second quarter looks set for a stronger performance based on strong jobs gains and other data.   Continued...