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Canadian retail sales disappoint in August

Tags: Retail
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Canadian retail sales rose less than expected in August from July while volume fell, suggesting debt-laden consumers will provide only limited support to broader economic growth in the third quarter.

Retail sales rose 0.3 percent in August to a record $39.07 billion, pushed up largely by higher gasoline prices, Statistics Canada said on Tuesday.

The increase was slightly less than the 0.4-percent advance predicted by analysts. Retail sales in volume terms slid 0.3 percent.

"Canadian consumer spending remained choppy through the first two months of Q3, but growth should still pick up from a very sluggish Q2 performance," Robert Kavcic, an economist at BMO Capital Markets, said in a note to clients.

The Bank of Canada on Tuesday forecast growth this year of 2.2 percent after maintaining hawkish language in its interest rate policy announcement.

It also flagged soaring household debt as a concern that will influence the timing of it next move.

Retail sales gains were reported in five of the 11 subsectors, representing 53 percent of total retail trade. August's total narrowly eclipsed the previous record of $39 billion reported in March.

Sales at gasoline stations rose 2.9 percent, reflecting higher prices at the pump, while food and beverage store sales were 0.3 percent higher. Sales at miscellaneous retailers - which include merchandise, office supplies and pet supplies stores - dropped 3.1 percent.

Stripping out sales by motor vehicles and parts dealers, retail sales rose by 0.4 percent. Overall retail sales were 2.7 percent higher than in August 2011.

"So far this year, retail sales have followed a see-saw pattern around an essentially flat trend," Toronto-Dominion Bank economist Leslie Preston said in a research note.

"More modest rates of real spending growth are here to stay for the foreseeable future, as consumers can no longer be the debt-fueled source of growth they have been over the past decade."

Analysts said the data reinforces the view that business investment and net exports will be needed to drive economic growth going forward.

The Canadian dollar weakened to a session low after the retail sales data was released, although it later strengthened on surprise in the markets that the central bank did not drop its tightening stance.

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