Canada Retail Sales Drop 0.6% in February--Update

By Paul Vieira Features Dow Jones Newswires

Canadian retail sales fell sharply in February on lower auto sales, representing the latest economic indicator to signal growth is slipping somewhat after a strong run.

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The value of retail sales declined 0.6% in February to a seasonally adjusted 47.76 billion Canadian dollars ($35.12 billion), Statistics Canada said Wednesday. Market expectations were for retail sales to remain unchanged from the previous month, according to economists at Royal Bank of Canada.

The drop marks a sharp swing after January's upwardly revised 2.3% rise in retail receipts.

In volume terms -- or when the effects of price changes are removed -- retail sales decreased by a smaller 0.1% in February. Analysts look at volumes to get a more accurate reading on economic activity.

"Given the drop in retail sales is largely the result of lower prices and a pause after a strong January, the consumer is still in the driver's seat of economic growth," TD Securities said, noting Canada's gross domestic product remains on track for annualized expansion in the mid-3% range in the January-to-March period.

Meanwhile, the data agency revised higher retail sales figures for previous years, and suggest the economy was in better shape last year than previously believed. Retail sales for the 2016 calendar year rose 5.1%, compared with the earlier estimate of a 3.7% advance. This could lead Statistics Canada to upgrade growth last year, economists say.

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On a 12-month basis, nominal retail sales in Canada rose 4.7% in February.

After recording strong-than-expected growth in the fourth quarter and in January, the economy looks to have slowed in February based on lackluster results in trade, factory shipments, and now retail and wholesale trade. Based on the retail report, economists are penciling in a relatively flat reading when February data on economic output comes out Friday.

The Bank of Canada said earlier this month that recent momentum in economic activity was due to temporary factors, and expected growth to slow starting in the middle of this year.

"In short, the economy is not yet firing on all cylinders," Stephen Poloz, the central bank's governor, told lawmakers this month.

According to the trade report, five of the 11 sectors tracked posted declines from the previous month.

Sales at motor vehicles and parts dealers fell 1.8% to C$12.47 billion, or the first decline in seven months. Excluding the auto component -- which accounts for a quarter of all receipts -- retail sales decreased 0.1%.

Gasoline station sales also dropped, 3.6% to C$5.05 billion.

Offsetting the declines were gains in health- and personal-care stores, up 2%, and clothing outlets, up 2.2%.

Write to Paul Vieira at paul.vieira@wsj.com

(END) Dow Jones Newswires

April 26, 2017 10:06 ET (14:06 GMT)