Cash registers at retail stores throughout the country were ringing a tad louder during July, according to figures released this morning by Statistics Canada.
Nominal retail sales in July rose a robust 0.7% with the decline in June lessened to 0.3% from 0.4% previously. Expectations going into the report were for a monthly increase in July of only 0.2%. The unexpectedly strength was in large part concentrated in sales at motor vehicle dealerships where activity rose 1.7%. Greater weakness had been generally expected in the wake of a drop in the earlier-reported unit auto sales numbers.
Market expectations for a more moderate increase were also premised on indications of flat gasoline prices in the month though this did not prevent receipts at service stations rising 0.7% in the month. The increase was in contrast to the previous two months where declining gasoline prices weighed on receipts and contributing to monthly declines of 1.5% and 1.2% in June and May, respectively.
Excluding these two volatile components, sales managed to rise 0.3% in the month which helped offset a 0.2% drop in this measure in June. The increase was led by sales gains at furniture (2.1%), building materials (1.9%) and health food (1.4%) stores. Some offset was provided by declines in sales at electronic and appliance (1.7%) and food and beverage (0.9%) stores.
The volume of July retail sales rose an encouraging 0.6% in the month. This followed upwardly revised rates in both June and May of 0.0% (-0.1% previously) and 0.9% (0.6%), respectively.
According to experts at RBC Economics, the rise in the volume of July retail sales is encouraging as it helps offset earlier indications of a 0.3% drop in July wholesale trade volumes and a likely 1.0% drop in manufacturing activity in the month.
"However," they add, "our monitoring of a 0.1% rise in overall July GDP assumes further offset from various natural resource sectors such as mining, where production is expected to rebound from maintenance shutdowns through the second quarter. This modest monthly increase in July follows a 0.2% gain in June and thus augurs well for economy continuing to grow in the third quarter though with the pace remaining close to the 2% annualized growth recorded over the first half of the year."
The bank also says, "such offers little prospect of sustained downward pressure on the unemployment rate with the Bank of Canada expected to keep monetary conditions highly accommodative to help instill greater momentum to growth.
"Our forecast assumes the current 1.00% overnight rate is likely to persist into the second quarter of 2013."
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