February 22, 2011 / 1:48 PM / 7 years ago

Weak autos drag down Canada's December retail sales

OTTAWA (Reuters) - Lower auto sales helped push Canadian retail sales down by 0.2 percent in December, but November’s strong growth was revised up by the same amount, Statistics Canada reported on Tuesday.

The soggy numbers will weigh on the reading for December gross domestic product, due out at 8:30 a.m. February 28.

“The only positives that are lining up for the month are coming through net trade and wholesale trade,” Scotia Capital economists Derek Holt and Gorica Djeric said in a note to clients.

Analysts still expect annualized fourth quarter growth to be at or above the Bank of Canada’s 2.3 percent forecast.

Canadian consumers are also upbeat, according to a new poll that showed confidence in the economy is higher than in any other of the Group of Eight advanced economies.

Excluding auto sales, which were down 2.8 percent from November, retail sales actually rose by 0.6 percent, as expected by analysts. A Reuters survey of analysts had predicted no change for overall retail sales.

In volume terms, used to calculate real GDP, December sales declined by 0.4 percent, but November’s figure was also revised up by 0.2 percentage points. All figures are adjusted for seasonal factors such as Christmas sales.

Data for December has tentatively painted a picture in which growth in demand shifted to exports from domestic consumption, though retail sales had grown solidly for six straight months. Statscan revised November’s gain to 1.5 percent from 1.3 percent.

For 2010 as a whole, sales were up 5.1 percent from 2009 and up 4.5 percent after adjusting for price increases.

Scotia Capital said it could not rule out a negative GDP reading for December, though some other analysts were more sanguine.

TD Securities and BMO Capital Markets both predict a 0.2 percent GDP gain for the month, half of November’s rate. But given the strength in fourth-quarter net exports, TD sees an upside risk to the central bank’s fourth-quarter GDP forecast, made in January, of 2.3 percent.

Bank of Canada Governor Mark Carney allowed for that upside potential in remarks to reporters in Paris on Saturday.

“Is it possible that the fourth quarter is going to be firmer than we had projected in our last monetary policy report? Yes, it is,” he said.

The central bank will set its policy rate on March 1, and no one expects an interest rate increase then.

Sixty-eight percent of Canadians described the current economic situation in the country as somewhat good or very good in a global survey by Ipsos conducted Jan 14-24. The result was up from 60 percent in December and compares with a 20 percent positive response in the United States and less than 30 percent average positive response across G8 countries.

Ipsos surveyed people in 24 countries on three assessments: the current economic situation in their country, the current economic situation in their local area and the six-month outlook for their local area economy.

While the global average on all three areas was largely unchanged, Canada showed big improvements in all three. “Canada is the superstar this wave, showing the highest cumulative growth on all three measures,” the pollster said.

The positive ratings on the current local area economy and the six-month outlook for the local economy were 49 percent and 31 percent, respectively. Both improved from December and were above the 24-country average.

Additional reporting by Louise Egan; editing by Peter Galloway

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