UPDATE 2-Canada retail sales flat but higher volumes spur optimism

Wed May 22, 2013 11:03am EDT
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* Market operators had expected a 0.1 percent rise

* Sales rose by 0.7 percent in volume terms

By David Ljunggren

OTTAWA, May 22 (Reuters) - Falling gasoline prices kept the value of Canadian retail sales unchanged in March from February, but analysts said a sharp rise in volumes signals the economy was more robust than expected in the first quarter.

Canada's economy has spluttered in recently, hit by uncertainty in foreign markets and the strong Canadian dollar, and at first sight the March retail figures seem to confirm the trend.

But Statistics Canada said on Wednesday that after removing the effects of price changes, particularly less expensive gasoline, retail sales in volume terms rose by 0.7 percent. The volume measure is used for calculating gross domestic product (GDP).

Mazen Issa, a Canada macro strategist at TD Securities, said the growth in volumes was surprisingly strong.

"The economy looks to have gotten off to a brisk start to the year with first quarter GDP tracking well above its trend rate - we estimate between 2.2 percent and 2.5 percent," he said in a note to clients.

The Bank of Canada last month forecast that first quarter annualized growth would be just 1.6 percent. Statscan will release the first quarter GDP data on May 31.   Continued...