More bright spots appeared in the Canadian economic picture over the winter.
Figures released this morning by Statistics Canada, showed nominal retail sales in February rose a robust 0.8% in the month and compared to expectations of a more moderate increase of 0.3%.
The increase builds further onto the 0.9% increase in January which was revised down slightly from the previously-estimated gain of 1.0%.
The overall increase was led by a 1.9% jump in receipts from gasoline stations that was helped by a jump in gasoline prices in the month.
The motor vehicle component also managed a solid increase rising 1.0% following a 2.9% jump in January as this component continues to unwind the unexpected 6.7% plummet in December. Excluding these two volatile components, sales rose a solid 0.5% following a 0.7% gain in January. The increase was led by gains in electronic and appliance stores (1.3%), general merchandise stores (2.8%) and sporting goods stores (0.5%). These gains more that offset declines at furniture stores (2.5%) and clothing stores (0.6%).
On a volumes basis, February retail sales were disappointingly flat. However, volume sales in January were revised up significantly to 1.1% from a previous estimate of unchanged sales.
Given the earlier-reported strength in manufacturing volumes in February, overall February GDP still looks likely to increase 0.2% in the month thus matching January’s gain. Though today’s report does suggest some downside risk to the February increase, it also suggests the risk of an upward revision to the January gain.
According to analysts at RBC Economics, "back-to-back monthly gains in GDP augur well for growth in the first quarter to strengthen relative to the disappointing 0.6% annualized gain in Q4.
"However," the bank concludes, "our projected Q1 increase of 1.9%, though slightly above the Bank of Canada’s forecasted 1.5%, is modest and would fail to reduce the amount of excess capacity in the economy or put sustained downward pressure on the unemployment rate."
