March 20, 2009 / 12:43 PM / in 9 years

Jump in car sales boosts Canada retail sales

OTTAWA (Reuters) - An unusual rise in new car purchases helped spur Canadian retail sales in January to their first increase since September, a greater than expected 1.9 percent, according to Statistics Canada data released on Friday.

<p>Toyota vehicles are displayed at a Toronto dealership January 6, 2009. REUTERS/Fred Thornhill</p>

The seasonally adjusted increase, the largest since July 2006, was a rare bright statistic after recent weak Canadian data for wholesale sales, manufacturing, foreign trade, employment, building permits and housing starts.

“Retail trade will thus be one of the few major sectors of the economy to add to growth in January, as almost every other indicator was simply brutal at the start of the year,” BMO Capital Markets deputy chief economist Douglas Porter said.

Economists noted that the retail sales rise was only a partial recovery from a 5.2 percent decline in December, the largest drop in more than 15 years. Sales were still 5.8 percent lower than in January 2008.

The value of sales at new car dealers rose 6.4 percent in January after December’s 15.1 percent decline.

In a separate release, Statistics Canada said the number of new motor vehicles sold rose by 5.5 percent to a seasonally adjusted 119,231 units in January. In unadjusted terms, the number actually fell to 78,812 from December’s 97,164.

However, TD Securities economics strategist Ian Pollick pointed out that preliminary reports suggest that February motor vehicle sales are tracking a 2.0 percent decline, setting the stage for a softer February retail sales number.

The automotive sector as a whole, including gasoline sales, rose by 3.8 percent in January. Excluding vehicles and parts, retail sales rose by 1.3 percent in the month.

A Reuters survey of analysts had predicted a 1.0 percent rise in retail sales, and a rise of 0.3 percent excluding autos.

The Canadian dollar initially rose after release of the data but then lost some of the gains as the market concluded that it would be unlikely to divert the Bank of Canada from its focus on the broad recession in the economy.

Many economists are predicting a slide of 0.5 percent to 0.9 percent in January’s gross domestic product, with an annualized decline in first-quarter GDP of around 6 percent.

Additional reporting by Ka Yan Ng; editing by Peter Galloway

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