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Canadian Retail Sales Gain in July Misses Economists’ Forecasts

Canadian Retail Sales Gain in July Misses Economists’ Forecasts

(Bloomberg) -- Retails sales increased 0.4% in July, the first advance in three months, as consumers spent more on new cars, Statistics Canada said Friday from Ottawa. The gain trailed economist expectations for a 0.6% increase. Excluding motor vehicles and gasoline, retail sales fell 0.1% on the month.

The report falls short of economist expectations for a larger rebound and may suggest higher debt servicing costs are hindering consumer consumption. Debt service costs reached a record in the second quarter, leaving consumers with less money in their wallets to spend on other goods.

In volume terms, which strip out the effects of price changes, July sales were flat on the month and the year, which echoed the second-quarter gross domestic product report that showed consumption has been weak. Year to date, volumes have increased 0.8%, slightly less than the 0.84% last year and the slowest pace of growth since 2009, the agency said.

The lacklustre showing for retailers “leaves the Canadian economy more dependent on trade and capital spending, with both seen as vulnerable to a global slowdown,” Avery Shenfeld, chief economist at Canadian Imperial Bank of Commerce, said in a note to clients.

Canada’s currency fell 0.2% after the release, trading at C$1.3286 against the U.S. dollar at 8:45 a.m. Toronto time.

Canadian Retail Sales Gain in July Misses Economists’ Forecasts

Key Insights

  • Friday’s retail sales data may heighten concern about the degree to which debt service costs, which reached a record in the second quarter, are eating into disposable income, and call into question how much Canada can continue to rely on consumers to fuel new economic growth.
  • Cannabis store sales were up 14.3% in July driving an uptick in miscellaneous store retailers
  • Ontario reported the largest increases in retail sales of any province, up 1.2% in July; sales in five other provinces rose: Alberta, Saskatchewan, Manitoba, Newfoundland and Nova Scotia

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  • Sales at motor vehicle and parts dealers advanced 1.5% in July, the largest gain in five months, due primarily to new car consumption
  • E-commerce sales accounted for 3.2% of total retail trade in July, up 32.8% on the year
  • Health and personal care stores reported higher sales for the fifth time in six months; food and beverage stores rose 0.6% led by higher receipts at supermarkets.
  • June’s flat retail sales was revised slightly lower to a decline of 0.1%

--With assistance from Erik Hertzberg.

To contact the reporter on this story: Shelly Hagan in Ottawa at shagan9@bloomberg.net

To contact the editors responsible for this story: Theophilos Argitis at targitis@bloomberg.net, Chris Fournier

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