Canadian retail sales record fifth gain in last six months in June

Canadian retail sales rose one per cent in June, the fifth gain in the last six months, and a boost economists say proves the recession is over.

Canadian retail sales rose one per cent in June, the fifth gain in the last six months, and a boost economists say proves the recession is over.

Statistics Canada said Monday that retail sales hit $34.4 billion in June, higher than expected. Adjusted for inflation, retail sales were up 0.4 per cent compared with May.

Gasoline was the biggest driver, with sales at the pump rising 4.7 per cent in June compared with May, due largely to higher prices. Auto sales were up 2.1 per cent.

StatsCan said overall retail volume was up 0.4 per cent from May, with sales rising in six of eight sectors.

It’s the second-straight month of gains, with May’s retail sales rising by 1.1 per cent from April, when sales fell by 0.7 per cent.

“Gains in retail sales add further weight to growing evidence that Canada’s recession ended in June,” said CIBC World Markets economist Krishen Rangasamy.

“Gains in retailing were broad-based, with June’s one per cent advance buoyed not only by prices but more importantly by volumes.”

Rangasamy noted that all provinces saw retail gains in June, with the exception of New Brunswick, where sales fell 0.2 per cent.

Manitoba and Saskatchewan saw the strongest sales growth at 2.8 and 2.3 per cent respectively.

Ontario sales grew by a mere 0.1 per cent compared with May, beat only slightly by Prince Edward Island which saw sales up 0.2 per cent, while British Columbia was up 0.7 per cent.

Sales in Nova Scotia and Newfoundland were up 1.8 per cent and one per cent respectively. Quebec’s sales rose 1.8 per cent and Alberta’s 1.3 per cent.

The June figures across Canada mean higher-than-expected second-quarter retail sales across Canada, “lending credence to the ’end of the recession in Q2’ call by the Bank of Canada,” said Andrew Pyle, an investment adviser at Scotia McLeod in Peterborough, Ont.

In July, Bank of Canada Governor Mark Carney declared the recession over, but also warned that the economy would emerge smaller and with a reduced output potential.

Canada has had three quarters of economic shrinkage — two successive quarterly declines is a technical definition of recession — so expected growth in the current summer quarter means the recession is over.

That said, employment growth is expected to lag and further job cuts are expected for several more months, which could keep retail sales low.

CIBC’s Rangasamy said June’s increase in sales volumes will be a boost to Canadian gross domestic product for the first time in 11 months. GDP is a key economic measure that shows the amount of goods and services produced over a specific period.

Rangasamy believes the GDP grew by 0.3 per cent in June. Official GDP figures are set to be released next Monday.

“This stronger-than-expected retail sales report points to the release of pent-up demand and likely much support from fiscal stimulus and lower prices,” Derek Holt and Karen Cordes of Scotia Capital said in a note Monday.

However, they said the “good news” is overstated because of higher prices for items such as gasoline and food. Food sales were up 1.3 per cent in June, while prices were up one per cent.

When volatile sectors such as autos, food and gasoline are excluded, sales were actually flat, they noted.

“Notwithstanding this effect, however, the price-adjusted volume of sales also increased by a respectable 0.4 per cent and that will be a boost to Canadian real GDP on the month,” they noted.

Holt and Cordes also said Ottawa’s Home Renovation Tax Credit, introduced in January to stimulate spending in certain parts of the economy, wasn’t enough to boost building and outdoor home supplies sales, which fell 0.6 per cent in June from May.

General merchandise stores sales fell 0.6 per cent and so-called miscellaneous retailers saw sales fall by 1.2 per cent.

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