Canadian retail sales show surprising strength

Fri Jan 21, 2011 10:28am EST
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By Leah Schnurr

OTTAWA (Reuters) - Canadian retail sales showed surprising resilience in November and posted their biggest gain in eight months, beating analysts' expectations and boosting optimism about the strength of the economy.

Retail sales rose 1.3 percent and marked a sixth straight month of gains, Statistics Canada said on Friday. It was the biggest increase since March 2010. Markets had expected a 0.5 percent rise, according to the median forecast in a Reuters poll.

The Canadian dollar firmed against the greenback after the data was released. The currency touched C$0.9941 to the U.S. dollar, up from around C$0.9966 to the U.S. dollar heading into the release.

Analysts said that on a quiet day for data, the report may have had a greater influence on markets than usual.

Strong consumer spending and government stimulus measures have been the major drivers of Canada's recovery from recession while exports have sagged due to the weak U.S. economy. The Bank of Canada said this week it expects consumer spending to contribute less to growth this year and next, with exports and business investment taking up the baton.

The November retail sales figure suggests that slowdown in consumer spending has not happened just yet.

"It was a surprisingly robust report. Just as it looked like Canadian consumers were starting to wind down, they actually have picked it right back up again," said Doug Porter, deputy chief economist at BMO Capital Markets in Toronto.

Sales expanded across eight of the report's 11 subsectors with the auto industry leading the way up. Total sales volume gained 1.3 percent in November after being flat the month before.   Continued...

<p>A Christmas tree is seen in the midst of shoppers in a major downtown shopping mall in Toronto December 12, 2009. REUTERS/Mark Blinch</p>