Canada Retail Sales Rise 0.6% in May on Autos -- Update

By Paul Vieira Features Dow Jones Newswires

Canadian retail sales climbed in May for a third straight month, powered by demand for new and used cars.

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Excluding the auto component, retail receipts fell slightly.

The value of retail sales in May rose 0.6% on a seasonally-adjusted basis to 48.91 billion Canadian dollars ($38.86 billion), Statistics Canada said Friday. That exceeded market expectations for a 0.3% gain, according to economists at Royal Bank of Canada.

In volume terms, factoring out the effects of price changes, total retail sales rose by 1.1% in May.

On a year-over-year basis, nominal retail sales rose 7.3%, marking the fastest 12-month rise in more than a year.

Excluding vehicles and auto parts, retail sales fell 0.1% to C$35.82 billion in May, due to a decline in receipts from gasoline stations and clothing stores.

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April's results were downgraded and now suggest retail sales rose 0.7%, versus an earlier estimate of a 0.8% gain.

The retail-sales report is one of the last major pieces of economic data to emerge before the release of May's report on gross domestic product by industry. Results for May have been encouraging, with two-way trade picking up momentum and a solid gain in factory sales.

The Bank of Canada expects household expenditures to remain robust in the near term, supported by job gains and firmer wage growth. But consumption is then expected to ease as housing activity slows down, and consumers deal with elevated debt loads amid an environment of rising borrowing costs. The Bank of Canada this month raised its benchmark interest rate for the first time in seven years amid an improving economy.

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

The motor-vehicle and parts component rose 2.4% in May to C$13.08 billion, after a decline the previous month, led by sales of new and used cars, as well as auto parts.

Food and beverage stores recorded a 0.9% gain, to C$10.11 billion, on higher sales at grocers and a big jump in alcohol sales, as warmer weather emerged and Canadians celebrated the Victoria Day long weekend.

Offsetting the gains was a 0.6% drop in sales at gasoline stations, the first drop in three months. The data agency attributed the decline to lower prices at the pump.

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

(END) Dow Jones Newswires

July 21, 2017 09:09 ET (13:09 GMT)