Canada retail sales unexpectedly fall on broad weakness

Wed Aug 22, 2012 12:03pm EDT
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By David Ljunggren

OTTAWA (Reuters) - Canadian retail sales dropped unexpectedly in June, confirming a weaker trend in consumer spending that will likely trim overall growth in the second quarter and which raises questions about the Bank of Canada's hawkish slant on monetary policy.

Retail sales dropped 0.4 percent in June from May on broad-based weakness across sectors and across the country, and May numbers were also revised lower, Statistics Canada data showed on Wednesday.

The figures, which bucked expectations for a 0.1 percent increase in sales, are the latest to suggest that consumer spending - one of the main supports for the Canadian economy since the 2008 crisis - is slowing down.

"The surprise drop in June sales was broad-based, suggesting households are becoming a little more cautious, though cross-border shopping may have played a role as well," BMO Capital Markets senior economist Benjamin Reitzes wrote in a note to clients.

"The constant haranguing by policymakers urging households to borrow more cautiously, along with slowing job growth, has prompted some restraint."

Declining sales were reported in seven of the 11 subsectors, representing 64 percent of retail sales. Sales volume dropped by 0.1 percent.

General merchandise store receipts were down 1.5 percent, in part due to store closures. Gas station sales fell by 1.3 percent on lower prices, while sales at motor vehicles and parts dealers dropped by 0.4 percent.

Stripping out sales by motor vehicles and parts dealers, retail sales fell by 0.4 percent. Overall retail sales were 1.7 percent higher than in June 2011.   Continued...

People go shopping in a mall in downtown Toronto, December 23, 2008. REUTERS/Mark Blinch