Canada retail sales data keep growth hopes alive

Tue Jul 24, 2012 11:05am EDT
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By Louise Egan

OTTAWA (Reuters) - Canadian retail sales rose by a weaker-than-expected 0.3 percent in May, but a healthy jump in sales volume and heavy shopping for food, beverages and clothing ignited hopes that consumers would help keep the economy out of the doldrums.

The robust sales in supermarkets, general merchandise and clothing stores offset a drop in auto and gasoline sales, Statistics Canada data on Tuesday showed. Six of 11 subsectors tracked by the agency reported gains, representing 53 percent of total retail trade.

Even though May sales fell short of the 0.5 percent growth forecast by market players and were not strong enough to make up for a 0.6 percent decline in April, sales that excluded motor vehicle and parts jumped 0.5 percent against expectations of no change.

Likewise, sales volume -- more important in calculating gross domestic product figures -- rose 0.7 percent.

Consumer spending was a crucial factor in Canada's quick recovery from the 2008-09 recession but it has weakened in recent months. The May data suggests it is not quite as weak as some had predicted.

"Overall, a quite healthy report, perhaps enough to nudge our estimate for May GDP up a tick to 0.3 percent, although we will later get payrolls data to add color to that reading," said Avery Shenfeld, chief economist at CIBC World Markets.

The Canadian dollar rose immediately after the data but was quickly knocked back down by bearish news from Europe. At around 10:00 a.m. EDT (1400 GMT) it was at C$1.0170 versus its U.S. counterpart, or 98.33 U.S. cents, down slightly from Monday's close of C$1.0168 to the greenback, or 98.35 U.S. cents.