Weak retail sales point to soft Dec growth

Fri Feb 22, 2008 1:50pm EST
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By Louise Egan

OTTAWA (Reuters) - Retail sales outside the auto sector disappointed in December, adding to a string of gloomy data suggesting weaker-than-expected economic growth at year-end.

Statistics Canada said on Friday that total retail sales climbed 0.6 percent in the month due to a surge in new car deals.

But excluding autos, sales fell 0.4 percent from November against forecasts for a 0.4 percent gain, missing expectations and knocking the Canadian dollar lower.

"Santa gave out a lot of new cars and trucks this Christmas, but not much else," said Jacqui Douglas, economist at TD Securities in a note.

The economy may have contracted slightly in December month-on-month following previous reports showing factory sales tumbled 3.4 percent, wholesale trade fell 2.9 percent and the December trade surplus shrank to a nine-year low in the month.

Statscan will release the December gross domestic product data on March 3.

The latest average forecast by analysts in a Reuters survey is for 0.1 percent GDP growth in December but BMO Capital Market's Doug Porter now pegs the figure at possibly as low as a negative 0.5 percent.

Still, economists remain upbeat that consumer spending will stay healthy in 2008 as personal income tax cuts kick in as well as a one percentage-point reduction in the federal sales tax to 5 percent. Real sales grew 5.5 percent in the fourth quarter on an annualized basis, up from 1.1 percent in the third quarter.   Continued...