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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;

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