Canadian retail sales are expected to rise sharply in August after a strong increase in July, marking a strong recovery after two straight quarters of sales declines.
The 0.5% increase in August, based on preliminary estimates from Statistics Canada released on Friday, was the third monthly increase in sales this year. This followed a 0.9% jump in the previous month, which beat expectations for a 0.6% rise in a Bloomberg survey of economists.
Overall, retail sales rose 0.8% in the third quarter, assuming flat growth in September. This follows a 0.4% drop in the second quarter and a 0.5% drop in the first quarter and the weakest two consecutive quarters since 2009, outside of the pandemic period.
The report gave a more optimistic signal on the strength of the Canadian economy than the latest gross domestic product (GDP) data, which showed growth stalled in June and July. This data may give more confidence to central bank policymakers that they can control inflation without leading the economy into recession.
Sales rose in seven of the nine subsectors in July, driven by increases at vehicle and parts dealers. Despite high volatility this year, car sales have generally been a strong source of revenue in recent years as Canada recovers from the pandemic, supported by pent-up demand and rapid population growth.
Excluding vehicle sales, revenue rose 0.4% in July, slightly beating expectations for a 0.3% increase. In terms of volume, sales rose 1%. Core retail sales, which exclude gas stations and car dealers, rose 0.6%.
The preliminary estimate for August is based on a response rate of 52%. Typically, 89% of companies provided feedback for the final survey.
