Canada retail sales drop, but recovery signs noted

By David Ljunggren

OTTAWA (Reuters) - Unseasonably warm weather pushed down Canadian retail sales in November but analysts said the underlying trend was positive and further confirmed that recovery from recession was under way.

Retail sales fell by 0.3 percent from October, partly due to lower demand for winter clothing and shoes, Statistics Canada said on Friday. Market analysts polled by Reuters had predicted a 0.2 percent fall.

In volume terms -- which excludes the effect of prices -- sales decreased 1.0 percent, the first month-on-month decline since April 2009.

Analysts said that despite the drop, the revised 1.0 percent month-on-month increase in October and a likely healthy December performance were reasons for optimism.

"Solid employment growth and improving confidence point toward better results in the coming months. In fact, December could be very strong, as cold weather returned and discounting was in full force," said Benjamin Reitzes of BMO Capital Markets Economics.

The data pushed the Canadian dollar down to its lowest level this year against the U.S. currency. The currency fell to C$1.0581 to the U.S. dollar, or 94.51 U.S. cents, before recovering slightly.

"A weak November probably gives cause to up expectations for December sales on low base effects in the final holiday push ... (and) the Vancouver Olympics could well have enough of a weight to lift first-quarter retail sales for the country," said Derek Holt and Karen Cordes of Scotia Capital Economics.

Sales declined in five of Statistics Canada's eight retail sectors. Clothing store sales fell by 2.6 percent, while the shoe, clothing accessories and jewelry stores trade group was down by 6.8 percent from October.