April 26, 2017 / 12:38 PM / 6 months ago

UPDATE 2-Canadian retail sales fall more than expected in February

(Adds details, background, economist comment)

OTTAWA, April 26 (Reuters) - Canadian retail sales fell more than expected in February, dragged down by lower vehicle purchases and cheaper prices for gasoline at the pump, but the decline did not alter expectations for strong economic growth in the first quarter.

Sales were down 0.6 percent, Statistics Canada said on Wednesday, while economists had forecast a 0.1 percent dip. January, however, was revised slightly higher to a gain of 2.3 percent from the previously reported 2.2 percent.

January’s strong sales, as well as other recent positive data, still put the first quarter on track for growth of around 3 percent, said TD Securities senior rates strategist Andrew Kelvin.

“There is so much strength through January, that pretty much gets us there,” Kelvin said.

The Bank of Canada had forecast first-quarter growth at 3.8 percent but expects the pace to moderate from there.

The central bank said earlier this month that it was too soon to conclude that recent strength is sustainable. Economists expect it to hold rates at 0.50 percent until next year.

“The fact that we have seen such strong growth through the last two to three quarters is something that really does firm the case for them staying on the sidelines,” Kelvin said.

The Canadian dollar had little immediate reaction to the data. It traded weaker against the greenback following Tuesday’s selloff after the United States imposed duties on Canadian softwood lumber exports.

Of the 11 retail sectors, sales declined in February in five accounting for 67 percent of the total. Volumes dipped 0.1 percent overall.

The vehicle and parts sector posted a 1.8 percent drop, hurt by weaker new car sales. Sales at gasoline stations tumbled 3.6 percent, the first decline in three months, due to lower prices. Excluding those two sectors, retail sales were up 0.5 percent.

Food sales also weakened, with consumers making fewer purchases at beer, wine and liquor stores, as well as specialty shops.

On the upside, sales at clothing and accessories stores rose 2.2 percent.

Additional reporting by Fergal Smith in Toronto; Editing by Lisa Von Ahn

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