Retail sales slip but spending seen solid

Wed Apr 23, 2008 2:21pm EDT
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By Louise Egan

OTTAWA (Reuters) - Retail sales unexpectedly fell 0.7 percent in February, the first decline in five months and a sign that consumer spending may be losing some of its spunk as the world and domestic economies slow.

Statistics Canada said on Wednesday the weakness was spread across all types of stores after a 1.4 percent jump in retail sales in January.

Analysts surveyed by Reuters had forecast, on average, that sales would inch 0.1 percent higher.

But economists noted that sales were simply returning to normal levels after two months of hefty gains.

"We still think that consumer spending in Canada is on solid footing," said Jacqui Douglas, economics strategist at TD Securities.

"Even if March sales come in flat, real retail sales are still on pace for a perfectly healthy 4.6 percent annualized gain in the first quarter."

Sales grew 5.7 percent in the year to February.

The Bank of Canada said on Tuesday it expects consumer spending to moderate this year, given the uncertainty caused by the U.S. economic storm. The bank slashed its key overnight interest rate by a half-point to 3 percent as it continued the most aggressive round of monetary easing since late 2001.   Continued...

<p>A customer browses jewelry inside the Hudson's Bay Company's flagship Toronto store October 28, 2005. REUTERS/J.P. Moczulski</p>