Fewer auto sales pull Canadian retail sales down in March

Fri May 20, 2016 9:12am EDT
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By Leah Schnurr

OTTAWA (Reuters) - Canadian retail sales fell more than expected in March as consumers bought fewer cars, underscoring expectations that the economy slowed heading into the second quarter.

Separate data from Statistics Canada on Friday showed the annual inflation rate rose to 1.7 percent in April, in line with forecasts. The core inflation rate, which strips out some volatile items and is watched by the Bank of Canada, was more robust, rising to 2.2 percent.

Nonetheless, neither report was expected to change the path of monetary policy, with the central bank widely expected to hold interest rates at 0.50 percent when it meets next week. BOCWATCH

"I don't think it changes the big picture for either the dollar or the Bank of Canada," Doug Porter, chief economist at BMO Capital Markets, said of the releases.

The Canadian dollar weakened slightly against the greenback immediately following the data. [CAD/]

The 1.0 percent decline in retail sales exceeded economists' forecasts for a decrease of 0.6 percent, though February was revised slightly higher to a gain of 0.6 percent. In volume terms, sales in March declined 1.3 percent.

"The important point for retail sales was this followed two extremely strong months and I don't think it takes away from the broader picture that the Canadian consumer has held up remarkably well so far in 2016," said Porter.

Sales at car and parts dealers dropped 2.9 percent as Canadians bought fewer new and used cars. Excluding autos, overall sales were down just 0.3 percent.   Continued...