MNI DATA IMPACT: Canada Retail Sales -0.1% Vs. Forecast +0.6%>

By Greg Quinn and Anahita Alinejad

     OTTAWA (MNI) - Canadian retail sales declined for the third time in 

four months in August, a surprise loss that included weakness in 

everything from auto sales to food and homebuilding supplies. 

     The 0.1% decrease lagged the 0.6% MNI median economist forecast, as 

did the 0.2% fall in retail sales excluding autos and parts. Food sales 

declined 0.8% and auto sales rose 0.1%, far short of some economists who 

said auto sales could have risen by around 2% on the month.

     Consumer spending had been a major driver of Canada's economy in 

recent years with unemployment falling to historic lows and more 

recently bringing solid gains in wages. The Bank of Canada has held 

interest rates unchanged this year citing a resilient domestic economy, 

and also proejcts growth will slow in the second half of the year after 

a burst in the second quarter.

     Even with historically low interest rates, consumer spending

power is under pressure from record debt loads. The cost of carrying

loans like mortgages reached a record 15% of household disposable income

in the second quarter, driven by even the small interest payments on

debts that have grown larger than Canada's GDP.

     The report still showed some signs of momentum. After stripping out 

price changes, sales volumes climbed 0.2% on the month. Statistics 

Canada also boosted the July sales figure to a 0.6% gain from an initial 

0.4% tally.

     Excluding motor vehicles and parts, sales declined 0.2%, also

less than the MNI median calling for a 0.1% increase.

     From a year earlier, total retail sales rose 1.1%.

--MNI Ottawa Bureau +1-613-314-9647; greg.quinn@marketnews.com

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