November 23, 2009 / 1:44 PM / 8 years ago

Canadian retail sales continue climb in September

4 Min Read

OTTAWA (Reuters) - Canadian retail sales grew twice as much as expected in September as consumers ramped up spending on a wide range of goods, suggesting the economy grew at a healthy clip in the month.

Retail sales jumped 1 percent from August with the biggest gains in the auto sector and at supermarkets, Statistics Canada said on Monday, which beat market expectations for a 0.5 percent increase. Sales were still 3.3 percent lower than a year earlier.

In volume terms, used to calculate real gross domestic product, sales increased 1.2 percent. The data helped lift the Canadian dollar.

Retail sales also increased 1 percent in August, according to Statscan's revised figures, and have grown in every month this year except April and July.

"September's sharp pop higher is a strong positive to monthly GDP on the heels of a generally decent tone across a number of indicators," said Derek Holt and Karen Cordes, economists at Scotia Capital.

The Canadian dollar firmed against the U.S. dollar after the report, helped also by stronger equity and commodity prices. The currency rose as high as C$1.0544, or 94.84 U.S. cents from Friday's close of C$1.0699 to the U.S. dollar, or 93.47 U.S. cents.

The auto sector contributed most to the retail gains in September, climbing 1 percent thanks in part to a 2 percent jump in used and recreational vehicles and parts.

But sales expanded overall in six of the eight retail sectors and, excluding autos, they rose 1.1 percent. Food and beverage stores sold 1.3 percent more than in the previous month, led by supermarkets. Sales also grew for general merchandise stores, miscellaneous retailers, furniture, home furnishings and electronics stores and pharmacies.

The only sectors with declining sales were building and outdoor home supplies, and clothing and accessories.

Third Quarter Weak

Despite the optimism about September GDP, economists say the economy may not eke out any growth at all in the third quarter due to weakness in the previous two months.

"This report is the second of three pieces of hard data that will drive into next week's GDP report for September, suggesting that the month saw decent economic activity," said Stewart Hall, markets strategist at HSBC Canada.

"Not perhaps enough to have pushed the quarter over the bar into a positive growth outcome, but certainly suggesting that the economy is beginning to move forward, leaving behind three months of stagnation preceded by recession," he said.

The economy shrank by 0.1 percent in August and was flat in July, leading Bank of Canada Governor Mark Carney to concede last week that the bank's projected 2 percent annualized growth for the third quarter would not materialize.

Even if the recovery arrives in full force in the fourth quarter, it will be driven almost entirely by consumer spending as exports continue to flag, analysts said.

"Unfortunately, the weakness in exports is likely to persist, as it is highly unlikely that U.S. consumers will be matching the comeback in Canadian consumers any time soon," said Doug Porter, deputy chief economist at BMO Capital Markets.

Reporting by Louise Egan; editing by Rob Wilson

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