July 21, 2020 / 1:35 PM / 23 days ago

Canada retail sales rise 18.7%, June gain could be higher: Statscan

OTTAWA (Reuters) - Canadian retail sales rose a record 18.7% in May, on higher motor vehicle and parts sales, as the economy began to reopen from shutdowns tied to the coronavirus pandemic, Statistics Canada said on Tuesday, with June figures expected to be even higher.

FILE PHOTO: A man walks past a sales sign on display outside a retail store in Ottawa, Ontario, Canada, July 21, 2017. REUTERS/Chris Wattie

Analysts in a Reuters poll had forecast an increase of 20.0% in May.

In a preliminary flash estimate, Statscan said June retail sales could rise by 24.5%. The agency also revised April’s record decline to 25.0% from an initial 26.4%.

Sales were up in 10 of the 11 subsectors tracked by the agency, led by motor vehicle and parts dealers, which rose 66.3%, the first increase seen in three months.

General merchandise stores, as well as clothing and clothing accessories stores, also added to the strength seen in May, Statscan said. The only subsector to post a decline was food and beverages, which fell 2.0%, following a record-high increase in March.

“Retail sales are rebounding strongly boosted by pent-up demand and as government income support measures provide a lift to household spending,” said Benjamin Reitzes, a director at BMO Capital Markets, in a note.

In volume terms, retail sales were up 17.8% in May.

The Canadian dollar CAD= strengthened to a more than five-week high at 1.3454 to the U.S. dollar.

But one analyst said the current strength could ease later this year.

“At the moment, sales are still being buoyed by the enormous government income-support programs and consumers satisfying pent-up demand, both of which could fade in the second half of the year,” said Royce Mendes, a CIBC senior economist.

The Canadian government said in July it now expected to post a C$343.2 billion ($255.07 billion) budget deficit, amid record emergency aid spending in response to the novel coronavirus pandemic. The aid includes income supports and a wage subsidy for affected businesses.

Reporting by Kelsey Johnson in Ottawa; editing by Jonathan Oatis

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