Canada retail sales jump, but Q3 growth still seen slow

Tue Sep 25, 2012 10:18am EDT
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By David Ljunggren

OTTAWA (Reuters) - Canadian retail sales jumped by an unexpectedly large 0.7 percent in July from June but that might have been the only spark in an otherwise sluggish third-quarter economic performance so far, analysts said Tuesday.

Retail sales hit a near record C$38.99 billion ($39.79 billion), in part due to higher sales of new cars, Statistics Canada said.

The leap was far greater than the modest 0.1 percent advance forecast by market analysts, and it contrasts with other recent figures showing the economy is slowing. Canada releases July gross domestic product figures on Friday.

Healthy consumer spending has helped shield Canada from economic problems in the European Union and the United States over the past several years.

"While welcome, we continue to track a flat industry GDP estimate," said TD Securities analyst Mazen Issa, predicting third quarter growth on an annualized basis would be just 1.0 percent. The Bank of Canada's latest forecast calls for 2.0 percent growth this quarter.

"Heading forward, we expect the pace of consumer spending to improve, though it will remain sub par relative to historical standards, suggesting that other sectors of the economy - such as net exports - will need to play a larger role in driving growth," Issa said in a note to clients.

Canada posted its biggest trade deficit ever in July, while wholesale and manufacturing sales both fell.

By contrast, July's retail sales figure was the second highest on record after the C$39.00 billion posted in March.   Continued...