Analysis:Weak Autos,Gas Overshadow Strong Cdn Core Ret Sales>

By Yali N'Diaye

     OTTAWA (MNI) - Canadian retail sales edged up 0.1% in June to a 

record C$49.0 billion, as lower auto and gasoline sales offset 

stronger-than-expected core sales, data from Statistics Canada showed 

Tuesday. 

     Sales grew at a steady pace of 7.3% year-over-year. 

     Analysts in a MNI survey had expected total sales to rise 0.2% on 

the month, and 0.1% excluding autos. 

     Instead, sales excluding motor vehicles and parts rose 0.7% in June 

after edging down 0.1%, and were up 6.6% year-over-year, accelerating 

from 5.2% in May. 

     Excluding autos and gasoline, retail sales were up 1.1% in June 

after rising 0.1% in May, lifting the 12-month growth rate to 6.6% from 

4.4%. 

     Overall, while the headline figure showed a moderation in the 

growth pace of retail sales, core sales actually picked up in June, 

reflecting the resilience of consumers despite elevated household debt 

that is expected by the Bank of Canada to slow spending down the road. 

     Total sales were up 1.5% in the second quarter after rising 2.7% in 

the first quarter. On a real term basis, more relevant to GDP, sales 

rose 2.1% in the second quarter, the same as the previous quarter, 

including a 0.5% gain in June. 

     Motor vehicles and parts sales fell 1.4% in June after rising 2.3% 

in May, and gasoline receipts were down 1.8%, partly as a result of 

lower prices. 

     Food and beverage sales also contributed to June's softer growth 

pace, as they edged down 0.1%. Miscellaneous sales contracted 1.8%. 

     Still, sales were up in 6 of 11 subsectors, but given their lower 

weight, they added up to just 38% of retail trade. 

     General merchandise store sales rose 2.9%, building material and 

garden equipment was up 2.2%, and clothing and accessories rose 2.7%. 

Furniture and home furnishing was up 1.4%. 

     Going forward, the central bank expects consumer spending to 

moderate "as growth in disposable income gradually slows, partly as the 

effect of the introduction of the Canada Child Benefit fades." 

     Elevated debt, a slowdown in the housing market, as well as higher 

borrowing costs are also expected to slow consumer spending. 

     Still, the Canadian labor market remains solid as well as consumer 

confidence, which could continue to support consumption. 

     The economy has consistently been adding jobs since December last 

year, with employment up 45,300 in June and 10,900 jobs in July. The 

unemployment rate declined to 6.5% in June and 6.3% in July, its lowest 

level since October 2008. 

--MNI Ottawa Bureau; email: yali.ndiaye@marketnews.com 

     [TOPICS: MACDS$,M$C$$$]