October 22, 2013 / 12:47 PM / 5 years ago

Canadian August retail sales rise, GDP to show growth

A resident and his child walk out of a convenience store, in a part of the town that has been reopened today, in Lac Megantic, July 9, 2013. REUTERS/Mathieu Belanger

OTTAWA (Reuters) - Canadian retail sales rose modestly in August, their second consecutive monthly rise, according to Statistics Canada data on Tuesday that pointed to similarly modest economic growth for the month.

The 0.2 percent rise in retail sales just missed the 0.3 percent consensus in a Reuters survey of analysts, after a downwardly revised 0.5 percent rise in July. Excluding motor vehicle and parts dealers, sales rose 0.4 percent, beating street expectations of a 0.2 percent gain.

The volume of sales, used in calculating real gross domestic product (GDP), was also up by 0.2 percent.

August wholesale trade, released on Monday, showed a gain of 0.5 percent, but with a different composition than retail. Wholesale was boosted by a gain in the auto sector, whereas retail sales of motor vehicles and parts fell 0.5 percent in August.

“With the manufacturing and wholesale figures already in hand, the small gain in retail sales volumes suggests August GDP will come in around plus 0.2 percent, consistent with our call for 2 percent annualized growth in (the third quarter),” BMO Capital Markets senior economist Benjamin Reitzes said in a note to clients.

The Bank of Canada says the economy has a potential growth rate of 2.1 percent for this year, so third-quarter growth of 2 percent would not be soaking up any excess capacity.

“We’re pretty much right on potential growth, so that’s one more reason for the Bank (of Canada) to wait a little longer, or a lot longer, more likely,” Reitzes told Reuters.

The retail sector has been mostly rising since the 2008-2009 financial crisis. Year on year, sales were up 2.7 percent. However, the gains in July and August only barely made up for a 0.7 percent fall in June.

The Bank of Canada next sets interest rates at 10 a.m. EDT (1400 GMT) on Wednesday, along with a new set of economic forecasts, and Statistics Canada will release GDP data for August on October 31.

Editing by Theodore d'Afflisio and Chizu Nomiyama

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