Nominal retail sales increased by 0.7% in October following September's 0.2% gain. Expectations going into the report were for 0.2% monthly increase. The increase was largely driven by a 1.6% rise in sales of motor vehicles and parts and same-sized increase in sales at gasoline service stations.
Excluding these two volatile components, sales rose 0.3%, a pick up from the 0.1% rise in September and 0.1% dip in August. This increase reflected strong gains in clothing (+1.8%) and at food stores (0.5%). Lower sales of furniture and electronics/appliances tempered the monthly increase.
The volume of retail sales rose 0.3% in October following two months of weak activity with a flat reading in September and a 0.3% decline in August. The rise in October set the volume of Q4 retail sales up only slightly relative to the third quarter consistent with our expectation that spending activity, while still rising, increased at a slower pace in the final quarter of 2012 than the 2.2% annualized increase recorded in Q3. A sharp 0.5% in jump in retail volumes in July set the third quarter up for its decent performance in the quarter.
According to experts at RBC Economics, "the rise in retail sales in October was a welcome relief following last week's very disappointing report on manufacturing sales. The increase in the volume of retail activity combined with an earlier reported rise in wholesale trade provides support to our view that economic activity snapped back in October and emerged from the soft patch that began in May.
"The strength in retail and wholesale activity," concludes Canada's largest bank, "is expected to be accompanied by a rebound in energy production following a number of maintenance shutdowns through the summer that curbed activity."
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