Correction to Canada Retail Sales Article

By Paul Vieira Features Dow Jones Newswires

Canadian retail sales increased in March due to strong demand for new and used cars. Excluding auto-related sales, retail receipts fell in the month.

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The value of retail sales in March rose 0.7% on a seasonally-adjusted basis to 48.29 billion Canadian dollars ($35.48 billion), Statistics Canada said Friday. Market expectations were for a 0.3% gain, according to economists at Royal Bank of Canada.

In volume terms -- or when the effects of price changes are removed -- total retail sales rose 1.2% in March. Analysts look at volumes to get a more accurate reading on economic activity.

On a year-over-year basis, nominal retail sales rose 6.9%.

Excluding vehicles and auto parts, retail sales fell 0.2% to C$35.26 billion in March, as declines at grocery stores, pharmacies, gas stations and clothing retailers weighed on results.

The retail report also suggests February's decline in sales wasn't as steep as first believed. The data agency now estimates retail sales fell 0.4% in the previous month, versus the earlier estimate of a 0.6% drop.

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Retail sales is one of the last major pieces of economic data to emerge before Canada gets a look at how its gross domestic product performed in the first quarter. The retail data for March likely reinforce widespread expectations that the economy grew at an annualized rate of between 3.5% to 4% in the first three months of 2017 -- or in line with the Bank of Canada's forecast for 3.8% expansion.

Even amid stronger growth, the Bank of Canada is expected to stick to its cautious outlook, fueled in part by trade-policy uncertainty and political tumult in Washington under President Donald Trump. The central bank is widely expected to keep its main interest rate unchanged at 0.50% when it issues its next policy decision May 24.

For the quarter, TD Securities said retail volumes rose 8% annualized in the first quarter, pointing to another outsize contribution from consumer spending. While this would suggest an economy moving closer to potential, "it will receive little fanfare from a central bank which has expressed discontent with [elevated] levels of household leverage and the current mix of growth drivers," the firm said in a note to clients.

The Bank of Canada said earlier this month that recent momentum in economic activity was due to temporary factors. For instance, it said domestic consumption was lifted by the payout of benefits to households with children that was recently introduced by the Liberal government.

According to the March retail report, six of the 11 sectors tracked posted increases from the previous month.

Sales at motor vehicle and parts dealers rose 3.2% to C$13.03 billion, or the strongest month-over-month gain in just over a year. New-car sales increased 3.8% while receipts from used-car transactions climbed 2.7%.

Also boosting retail sales in the month were increases at general merchandise stores, up 1.4%; and electronics and appliance outlets, up 3.1%.

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

Corrections & Amplifications

This item was corrected at 11:46 a.m. ET to show that The Bank of Canada forecast 3.8% annualized gross domestic product growth in the first quarter. The original incorrectly stated the forecast rate as 2.2%.

The Bank of Canada forecast 3.8% annualized gross domestic product growth in the first quarter. "Canada Retail Sales Rise 0.7% in March, Fall 0.2% Ex-Autos -- 2nd Update," at 10:06 a.m. EDT, incorrectly stated the forecast rate as 2.2% in the seventh paragraph. (May 19, 2017)

(END) Dow Jones Newswires

May 19, 2017 11:59 ET (15:59 GMT)